The multinational IT technology manufacturer Hewlett-Packard seems to be under the spotlight due to irregularities in its balance sheets.
The company, whose profits have decreased continually, accused Autonomy, an enterprise software company that HP acquired in 2011, of inflating its balance statements. HP claim this has forced them to write off $8bn from their accounts, out of a buying price of $11bn.
However, the question now is who is it to blame? Autonomy or Hewlett-Packard? The truth is that there is still a lot of light to be shed on this matter as both companies accuse the other.
It is still not clear whether Autonomy inflated its financial statements before it was acquired by HP and more evidence will need to be gathered. However, it is not the first time that the American multinational finds itself in a similar situation
Earlier this year, Hewlett-Packard wrote off another $8bn from its acquisition of EDS and previously it was required to do the same with $1.2bn from the purchase of another smaller IT company
Many analysts are starting to think that either HP doesn’t undergo thorough due diligence on every company it acquires, and therefore tends to overvalue them. Alternatively they may be involved in accounting practises that keep its share price healthy.
After the company revealed its financial status on Tuesday and the allegations of accounting fraud were revealed, its stock price dropped 12%. There is significant uncertainty about what will happen over the next few months.
Rumours have already begun to circulate on a possible class action lawsuit by the shareholders of the company, which are still in disbelief after all the recent news of mismanagement in the company and the accusation of fraud.
HP’s new CEO, Meg Whitman has said that she is doing everything possible to get the company back on track, but according to her, it may take them several years to recover fully and start growing again.
The solution seems distant at the moment which means we will need to wait and see what the outcome of the current situation will be.