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HP Alleges 'Fraud' By Autonomy, Posts $6.9 Bln Loss In Q4; Shares Plunge

HP Alleges 'Fraud' By Autonomy, Posts $6.9 Bln Loss In Q4; Shares Plunge
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Computer and printer maker Hewlett-Packard Co. (HPQ: Quote) reported a $6.9 billion loss in the fourth quarter compared to a profit last year, hurt mainly by a hefty goodwill impairment charge on Autonomy accounting, apart from restructuring and other costs. Stripping down the charges, adjusted earnings per share topped analysts' expectations, while quarterly revenues missed their estimates.

HP alleged Autonomy of serious fraud related to willful accounting improprieties, disclosure failures and outright misrepresentations. In a statement, the company said, "These misrepresentations and lack of disclosure severely impacted HP management's ability to fairly value Autonomy at the time of the deal." HP is reportedly seeking the intervention of the UK's Serious Fraud Office and US SEC.

Palo, Alto, California-based company also provided earnings guidance for the full-year 2013 in line with Street Consensus, and for the first quarter, well below their view, which saw HP shares lose more than 10 percent in early deals.

According to industry research firm Gartner Inc. (IT) early last month, China's Lenovo Group Ltd. overtook HP as the world's top PC vendor in the third quarter. Lenovo took the No. 1 position in worldwide PC shipments for the first time in the company's history, as its market share increased to 15.7 percent, while HP's global PC share slipped to 15.5 percent.

HP has been enjoying the position of world's top PC vendor since the third quarter of 2006, when it took the lead from arch rival Dell, Inc. (DELL), which is now at the third spot followed by Taiwan's Acer Group, with market share of 10.5 percent and 9.9 percent, respectively.

Hewlett-Packard President and CEO Meg Whitman said, "As we discussed during our Securities Analyst Meeting last month, fiscal 2012 was the first year in a multiyear journey to turn HP around. We're starting to see progress in key areas, such as new product releases and customer wins."

Palo, Alto, California-based HP reported a hefty net loss of $6.85 billion or $3.49 per share for the fourth quarter, compared to net earnings of $239 million or $0.12 per share in the prior-year quarter.

Results for the latest quarter include goodwill and intangible asset impairment charge of $8.8 billion relating to the autonomy business within the software segment as well as other costs and charges. Excluding items, adjusted net income for the quarter was $2.28 billion or $1.16 per share, compared to $2.35 billion or $1.17 per share in the year-ago quarter.

On average, 29 analysts polled by Thomson Reuters expected earnings of $1.14 per share for the quarter. Analysts' estimates typically exclude special items.

HP said its revenues for the quarter declined 7 percent to $29.96 billion from $32.12 billion in the same quarter last year, and missed twenty-six Wall Street analysts' consensus estimate of $30.43 billion.

Personal systems revenue decreased 14 percent to $8.71 billion, with total units down 12 percent amid a 12 percent drop in both desktops and notebooks units. Printing revenue declined 5 percent to $6.08 billion, with total hardware units dropping 20 percent.

Services revenue declined 6 percent to $8.71 billion, with technology services revenue down 4 percent, application and business services revenue dropping 7 percent as well as IT outsourcing revenues declining 6 percent from last year.

Enterprise servers, storage and networking or ESSN, revenue declined 9 percent to $5.12 billion, with networking revenues growing 7 percent, while industry standard servers revenues were down 7 percent, business critical systems revenues declined 25 percent, and storage revenues dropped 13 percent year-over-year. Meanwhile, software revenue grew 14 percent to $1.17 billion, and HP financial services revenues edged up 1 percent to $966 million from a year ago.

For fiscal 2012, the company reported a net loss of $12.65 billion or $6.41 per share, compared to net profit of $7.07 billion or $3.32 per share in the year ago. Excluding items, adjusted net earnings was $8.04 billion or $4.05 per share, compared to $10.38 billion or $4.88 per share in the prior year.

Net revenues declined 5 percent to $120.36 billion from last year, or down 4 percent when adjusted for the effects of currency.

Street was looking for full-year 2012 earnings of $4.04 per share on annual revenues of $120.90 billion.

Looking ahead to the first quarter, HP said it expects adjusted earnings in the range of $0.68 to $0.71 per share, with analysts currently expecting $0.85 per share.

For fiscal 2013, HP provided initial adjusted earnings guidance in the range of $3.40 to $3.60 per share, while Street is currently looking for $3.52 per share.

HPQ closed Monday's regular trading session at $13.30, up $0.33 on a volume of 32.61 million shares, higher than the three-month average volume of 27.54 million shares.

In Tueday's regular trading session, HPQ is currently trading at a 52-week low of $11.85, down $1.45 or 10.90% on a volume of 74.03 million shares.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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