On a day when Hewlett-Packard should be focused on selling its products to U.S. consumers shopping at Black Friday sales, it instead finds itself on the defensive, trying to prop up its story of bad accounting at a company it purchased last year. After a couple of days of statements from the people involved, there is so far nothing to support Hewlett-Packard’s worries or to justify the $9 billion write-down of Autonomy it announced on Tuesday. The allegations that sounded plausible three days ago now seem more likely to have been made up.
In any business takeover, but especially of a business that sells something abstract like computer software, there will have to be retrospective accounting adjustments, as the interpretation of transactions is adjusted to match the practices and interests of the acquiring company. That is doubly true when the two companies’ books are done according to the rules of two different accounting standards bodies. So far there is nothing to indicate that the supposed problems at Autonomy rise above this level of adjustment.
The lens, then, has to be turned back toward Hewlett-Packard. Hewlett-Packard has acquired companies before, but few of the directors and executives involved in those acquisitions are still around, so is a lack of continuity at Hewlett-Packard getting in the way of routine business transactions? Hewlett-Packard showed what looked like a paranoid streak in its last management reshuffle, and that was not the first time, so is that same paranoia behind this week’s wild allegations? And if so, is the $9 billion write-down just the latest in a series of expensive mistakes from a board that has come to see the world as a hostile, unwelcoming place? If a company is this suspicious of a subsidiary, how long can it be before it is wrapped up in endless litigation with its suppliers, customers, and affiliates?
In its conference call, Hewlett-Packard hinted darkly at criminal charges that may be forthcoming against Autonomy employees and its own auditors and advisors. Yet if the story about Autonomy turns out to be unfounded, it is the leadership at Hewlett-Packard that investigators will be taking a close look at. When you are a corporate officer, there is a thin line between making up excuses and making false statements to investors. With what we know so far, it is impossible to tell which side of the line Hewlett-Packard was standing on this week.
