This board has only one thing left to do: resign
“Hewlett-Packard’s $9.7 billion acquisition of Autonomy seemed like a bad idea long before Tuesday’s allegations of an accounting scandal made clear it was a deal that should never have happened.
It’s the latest in a cavalcade of costly blunders at HP. The Silicon Valley pioneer has squandered billions of dollars on ill-advised acquisitions, compounding the challenges it already faces as it scrambles to adjust to a world that is shifting away from PCs to smartphones and tablets.
On Tuesday, HP took an $8.8 billion write-down for the Autonomy acquisition. Hewlett-Packard Co. CEO Meg Whitman alleged that executives at Autonomy used various accounting tricks to make the British software company appear more profitable.
The Autonomy deal may amplify the pressure on HP to reshuffle its board of directors, which already had been overhauled after a series of previous embarrassments”
MICHAEL LIEDTKE, AP (21 November, 2012)
As though it doesn’t have enough problems already, HP made a startling disclosure last week. It is writing down $8.8 billion against its recent $11.7 billion acquisition of Autonomy, a British software company. HP alleges it was the victim of an accounting fraud perpetuated by insiders at Autonomy. Two sets of auditors, Deloitte and KPMG, are accused of missing massive revenue overstatements by the seller.
HP’s stock price fell 12% in one day after the announcement.
If you think this is bad enough, consider that this same company announced only in August that it was writing off another $8 billion against an earlier acquisition, of EDS. That’s $17 billion of shareholders’ money up in smoke. Do you want to count $17 billion with me? It’s nearly half of Kenya’s GDP. HP also bought Palm, and promptly killed it. If you have an overpriced company to sell, call the HP board.
Last October, I wrote on this page: “When boards have designed systems that reward failure, is it any surprise that big companies keep failing? What would be fitting now would be for the HP board to fire its selection committee immediately. And then fire itself…Once-proud HP now needs rebooting. This ridiculous board must be re-formed from scratch, and huge efforts made to rediscover the HP way. Its shareholders and customers must demand it.”
Too harsh? Not if you consider that this board has selected and ousted a procession of inappropriate CEOs over the past decade; that it has faced acute embarrassment over charges of illegal prying into phone records; that it has presided over an astonishing decline in its various once-highly-successful businesses; and that its share price is now at a ten-year low.
Hidden in this dramatic announcement was the news that several core businesses are in severe difficulty. HP’s commoditized PC business is fading steadily, and has razor-thin margins. HP has singularly failed to compete in the burgeoning mobile computing market. Even its relatively protected printer business faces deep year-on-year declines.
People don’t sit at desks much to compute stuff these days; and they print a lot less. HP’s ever-squabbling board, embroiled in one failed recruitment and acquisition after another, has completely missed this point.
Back to Autonomy. AP reminds us that HP paid 64% more than market value at the time of purchase. Its CFO reportedly opposed the decision. 10 out of 11 current directors voted for the purchase, including current CEO Meg Whitman. Blaming auditors and the seller doesn’t cut it, I’m afraid. It’s time for the entire board to say sorry, resign and slink out of the door. It has destroyed shareholder value, missed the boat on mobility, and kept itself engaged in laughable scandals. It should do the honourable thing now.
Otherwise, see you here next year to discuss the latest fiasco.