HP claims Autonomy overstated profits by 81%

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HP claims Autonomy overstated profits by 81%

Hewlett Packard said Autonomy, the software firm it bought in 2011, overstated profits at one of its main British units by 81 percent in the year before it was sold in Britain's biggest-ever technology deal.

Little over a year after the $11.7 billion acquisition, the Silicon Valley company wrote down the value of Autonomy by $8.8 billion, accusing the management of accounting irregularities.

Autonomy was founded and led by British entrepreneur Mike Lynch, who has repeatedly denied the allegations.

In the first specific allegation since the writedown, HP said it had refiled 2010 accounts for Autonomy Systems Limited, one of its British operating units, revising the annual revenue down by 54 percent to 81 million pounds.

Net profit for the period was reduced by 86 million pounds to 19.6 million pounds according to the filing, seen by Reuters, that HP says it has made to Companies House – the organisation that registers UK companies.

The drop, $133 million at 2010 exchange rates, compares with reported 2010 net profit for Autonomy as a whole of $217 million, according to the company's annual report.

Lynch had previously said that differences in IFRS and U.S. GAAP accounting standards appeared to have had a role in some of HP's allegations.

"The extensive investigations undertaken by Hewlett-Packard ... into the past accounting practices of the group, have revealed extensive errors (including misstatements) in the previously issued financial statements," the revised accounts said.

HP has said it passed information from an unidentified whistleblower to the US Department of Justice, the SEC and Britain's Serious Fraud Office. Until now, however, few details had emerged about the nature of the alleged irregularities.

HP said most of the reduction in profits was due to "fundamental errors", with the remainder put down to differences in accounting policies used by HP and Autonomy.

Lynch's spokeswoman, Vanessa Colomar, said Lynch and the former senior management of Autonomy rejected the allegation of overstated profits which was contained in the refiled accounts. Colomar added that the size of the adjustments in the 2010 results did not fit with the scale of HP's $5 billion writedown.

"We continue to reject these allegations by HP," she said.

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