The Hewlett-Packard Company (NYSE:HPQ) has settled three lawsuits brought on by its shareholders over allegations of malpractices in its disastrous $11 billion buyout of British enterprise software maker, Autonomy Corporation, in 2011.
The clause of the lawsuit calls for sweeping changes to HP’s governance structure to prevent such an episode from happening again, and asked the company to pay for litigation expenses stemming from the lawsuits. The lawsuits and harsh criticism amid the Autonomy saga has also prompted an investigation by the Securities and Exchange Commission (SEC) and the Federal Bureau of Investigation (FBI), who are looking at criminal aspects of the case. The UK's Serious Fraud Office has also launched a probe and the multi-national investigation into the matter is currently under progress.
Autonomy entered administration in 2012 amid claims of accounting improprieties and falsifying performance metrics. HP took an $8.8 billion accounting charge and restructured the company noting that over $5 billion of Autonomy’s value had been misrepresented and inflated using fraudulent tactics.
- Warning! GuruFocus has detected 5 Warning Signs with HPQ. Click here to check it out.
- HPQ 15-Year Financial Data
- The intrinsic value of HPQ
- Peter Lynch Chart of HPQ
Sources report that HP has agreed to settle the cases with the shareholders’ attorneys in an out-of-court deal with the help of mediation. Under terms of the deal, shareholders will drop all charges against HP, its executives, board members, and CEO Meg Whitman. Furthermore, the settlement means shareholders will now work with the company to pursue charges against former executives of Autonomy, including former CEO Michael Lynch, and CFO Sushovan Hussain, among others.
Following news of Autonomy’s collapse in 2012, shareholders moved to sue HP, claiming that the company had breached its fiduciary duties, wasting resources, and damaging the company’s financials. HP on the other hand is pointing towards Autonomy co-founder and its then-CEO Michael Lynch, who had orchestrated the deal. Lynch left the company in 2012, and has claimed no wrongdoing, attributing the Autonomy’s failure to HP’s own mismanagement following the acquisition.
Private IT companies are being paid almost £5bn a year by the taxpayer to run Government computer networks. An analysis of contracts across Whitehall shows that the American computer giant Hewlett-Packard alone was paid £140m a month last year by the Department of Work and Pensions (DWP) and the Ministry of Justice for computer services.
The sums paid out to major international IT firms dwarf the £2.2bn paid to ‘outsourcing’ companies like Serco and G4S, who have been subjected to the most ferocious public criticism over their state contracts.
The figures were uncovered by the Whitehall think-tank, the Institute for Government, and Spend Network, which aggregates raw Whitehall spending data to show which private companies are the biggest recipients of taxpayer largesse.
Overall there are at least eight IT suppliers receiving more than £100m every year from a single government department, and at least 15 suppliers receiving more than £100m in annual revenues from multiple Government departments. The largest contractor – the American IT giant Hewlett-Packard – has contracts worth £1.7bn a year.