Hewlett-Packard‘s already troubled history with deal-making just got worse.
The technology giant said on Tuesday that it had taken an $8.8 billion accounting charge, in part related to accounting problems at Autonomy, the British software company it bought for $10 billion last year. The announcement comes just one quarter after another large write-down by H.P. in relation to Electronic Data Systems, which itself follows a string of deal-making missteps by the company.
“I’m speechless,” said Brian Marshall, an analyst at the ISI Group, which downgraded H.P. to “neutral” from “buy” following the news on Tuesday.
The charge contributed to a quarterly loss of $6.9 billion for H.P., compared with a $200 million profit in the quarter a year earlier. H.P. said it had discovered “serious accounting improprieties” and “outright misrepresentations” at Automony that took place prior to the acquisition.
The company’s shares fell more than 11 percent on Tuesday to around $11.74.
The latest setback comes as H.P. has struggled to revive its business. For years, H.P. has turned to deal-making to help it grow, buying of E.D.S., Palm and Compaq. Since 2001, the company has spent at least $67 billion on acquisitions, according to Robert W. Baird & Company. That’s more than H.P.’s current market capitalization of about $23.4 billion.
“If you think about the companies they’ve acquired over the last several years,” Mr. Marshall said, “it’s just unbelievable how much value has been destroyed.”
In August, H.P. said it would take an $8 billion charge related to E.D.S., which it acquired for $13.9 billion four years earlier. The business, which provides consulting services to enterprise clients, had been losing ground to rivals.
Last year, H.P. announced a $1.7 billion charge when it said it would close its webOS device business — just a year after picking up the handset maker Palm for $1.2 billion.
The deal-making engine, however, has recently slowed as its cash pile has dwindle. The company reported about $11.3 billion of cash in the recent quarter. While that an improvement over the quarter last year, it is lower than the $13 billion of cash in 2009.
The takeover of Autonomy was criticized as too expensive when it was announced in the summer of 2011. Léo Apotheker, the chief executive at the time, soon resigned. He was replaced by Meg Whitman, a former head of eBay.
Ms. Whitman said on Tuesday that the company was “starting to see progress in key areas.” The company said in a statement that it remained “100 percent committed” to Autonomy, despite being “extremely disappointed” by its findings.
Some analysts had been skeptical of Autonomy before Tuesday’s announcement. But the size of the write-down was largely unexpected. And the language H.P. used — “improprieties” and “misrepresentations” — came as a surprise.
“That’s not something I expected to hear,” said Jayson Noland, an analyst at Robert W. Baird & Company.
The ISI analyst, Mr. Marshall, described the company as being in “free fall.”
“There has been perhaps irreparable damage to the franchise,” Mr. Marshall said. “A lot of people in the tech industry are pretty sad about that.”
DealBook: Latest Slip for H.P. Forces a New Write-Down
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DealBook: Latest Slip for H.P. Forces a New Write-Down
