HP GOOWILL WRITEDOWN SOFTWARE

HP says Autonomy was reporting these deals as if they were software-license agreements and recognizing all the revenue upfront. Revenue on software-as-a-service deals should only be recognized when the customer pays, according to accounting standards-typically on a monthly subscription basis. HP is also accusing Autonomy of not booking its software-as-a-service sales correctly.

These deals were allegedly reported as revenue in advance of actual sales to customers using the software.

HP GOOWILL WRITEDOWN SOFTWARE

HP is also accusing Autonomy of not properly reporting deals to license its software to resellers-partners who sold Autonomy software with packages of hardware or services.

It was allegedly hiding this by reporting some portion of the cost of those products as a marketing expense, rather than as a cost of goods sold.

BOSTON/NEW YORK (Reuters) - Hewlett Packard Co warned of a mammoth quarterly loss after writing down 8 billion on the value of its services.

HP says Autonomy was selling some low-margin hardware at a loss but booking those sales as high-margin software sales. HP braces for huge loss after 8 billion EDS writedown.

The rest comes from impairment of goodwill and other intangible assets related to the acquisition, prompted by the drop in HP's stock price.

Of HP's $8.8 billion writedown announced today, $5 billion is related to the alleged fraud at Autonomy.

AllThingD's Arik Hesseldahl offers a good rundown of the charges: The allegations are that people at Autonomy ran their books in such a way that it made the company seem more valuable than it was. That alleged deception accounted for most of an $8.8 billion writedown the company's taking.īut what exactly are they accusing the former management team at Autonomy of doing? HP also said it had moved faster than it previously anticipated with plans announced in May to reduce 27,000 jobs, or 8% of its workforce.īecause of this, it raised its estimate of a third-quarter pre-tax restructuring charge to as much as $1.7 billion from its previous estimate of $1 billion.Īs a consequence of the impairment charge and the restructuring charge, HP said it expected to post a third quarter loss of $4.31-4.49 per share.HP execs are claiming they were misled by Autonomy when former CEO Léo Apotheker made the second-largest acquisition in the company's history last year. The firm is scheduled to release quarterly earnings on 22 August after the closing bell. The deal was unpopular on Wall Street from the day it was announced in May 2008 as critics questioned if then CEO Hurd was paying too dearly for a slow-growing company.

“When indicators of potential impairment are identified, companies are required to conduct a review of the carrying amounts of goodwill and other long-lived assets to determine if an impairment exists,' HP said in a statement.Īnalysts said that the charge confirmed what has long been widely known by investors: HP paid too much for EDS, one of the pioneers of the outsourcing of technology services. HP said it decided to take the $8 billion non-cash charge in its fiscal third quarter ended July following a review prompted by declines in its stock price, changing market conditions and the services division’s financial performance. “It is hard for me to get too terribly positive on it.' “There are a lot of unanswered questions,' said Stifel Nicolaus analyst Aaron Rakers. Microsoft will take a US6.2 billion goodwill charge this quarter to recognize that its online services business won’t grow as quickly as it had forecast, the company announced Monday. That’s why the stock is up,' said Shaw Wu, an analyst with Sterne Agee.īut analysts cautioned it is premature to say HP’s darkest days have passed, especially because the firm did not explain why it raised its outlook for profit, excluding items. Now they said they are going to beat their forecast. “Everybody was expecting them to miss the quarter. HP’s stock rose 2.4% to end at $19.41 after the increase in the company’s outlook relieved investors, who had been expecting another bad quarter with global IT spending on the wane. In a sign that Whitman’s efforts to trim costs and bolster the company’s prospects were succeeding, HP on Wednesday raised its quarterly outlook for profit, after excluding one-time items such as the goodwill writedown. HP’s stock has lost more than half its value in the two years since CEO Mark Hurd unexpectedly resigned amid a scandal over his relationship with a female marketing contractor.

Hp goowill writedown