Hewlett-Packard ( HP) and

Autonomy Acquisition
GROUP 10

Vu Thi Nhu Nguyen Thi

Pham Thu Huyen
Quynh Khanh Huyen
 Introduction about Hewlett-
1
Packard (HP) and Autonomy
Corporation.

2 Why HP wanted to acquire

Autonomy?

CONTENTS 3 How Autonomy fooled HP?

4 The problem in HP’s reaction.

5 The Consequence.
1 Introduction about
Hewlett-Packard (HP)
and Autonomy
Corporation.
Hewlett-Packard Company
(commonly referred to as HP)
An American multinational information
technology company headquartered in Palo
Alto, California.

It developed and provided a wide variety

of hardware components as well as
software and related services

Specialized in developing and

manufacturing computing, data storage,
and networking hardware, designing
software and delivering services.
Autonomy Corporation

A multinational enterprise sofeware Specialised in analysis of large

company found in Cambridge, scale unstructured “big data“.
United Kingdom in 1996
2
Why HP wanted to acquire
Autonomy?
From software of the British software
company Autonomy that can turn huge
volumes of images, text, and video into
useful statistics and insights for
businesses.

Acquiring that technology will enable HP

to expand its business software products,
and put it in a good position to exploit a
trend dubbed “big data.”
3
How Autonomy fooled HP?
Autonomy was selling some
low-margin hardware at a
loss but booking those sales
as high-margin software
sales.
Autonomy was reporting on
software as a service deals as if
they were software-license
agreements and recognizing all
the revenue upfront
Autonomy diddn't book its
software as a service sales
correctly
Differences between IFRS
and US GAAP would
impact historic growth rates
The announcement is made against a backdrop of 27,000 jobs
being axed with many Autonomy staff leaving the company,
including Chief Financial Officer Sushovan Hussein.
4
The problem in HP’s reaction .
 Problem 1 Problem 2
HP misjudged the value
Hewlett-Packard announced to
of Autonomy is $11 write-down $8.8 billion. It
billion and recorded the consists of $5 billion for
value of intangible recovering Autonomy’s
assets is $ 6.4 bill and misrepresentations and lack of
goodwill is $ 4.6 bill realiable financial information
impacts
unrealiably.
 Problem 1
"These improprieties were
discovered through an internal
investigation after a senior
member of the Autonomy
leadership team came forward 01
following the departure of
(former Autonomy CEO Mike
Lynch) on May 23rd," Whitman
said.
Most of the original $11
billion purchase price was
over and above the book 03
value, or net asset value of
Autonomy, a fast-growing
software company.
Autonomy’s auditors
Deloitte are sticking to
their gun, but HP’s
auditors, EY won’s give
an opinion on the
restated numbers, citing
01 02 02 lack of “appropriate
evidences”.
Autonomy listed total assets of
$3.5 billion right before it was
acquired. At the time of
03 04 04 acquisition, HP initially
accounted $6.6 billion toward
goodwill and $4.6 billion
towards other intangibles.
According to FRS 10 for Goodwill and Intangible
assets, the standard requires purchased goodwill and
certain intangible assets must be valued reliablely.

Although the amount of general intangible assets of

Autonomy is making a big dout. So, it was not valued
unrealiably. HP intentionally recorded these on the
financial statement.

Goodwill was valued unrealibely

 Problem 2

Hewlett-Packard announced to
spend & 8 billion make up for
the losses when they bought
Autonomy Corporation. In which, $ 5 billion related to
the misrepresentation of
accounting information.
The rest, writing down
However, when the case had
Goodwill
not been clarified, HP
released baseless numbers and
$ 3.8 billion for Impairment
los of Goodwill is not reliable
 The Financial Accounting Standards Board (FASB) issued
ASU No. 2014-02 in January 2014 :
- Allows companies to amortize goodwill for book purposes
- Under the no-amortizing policy, goodwill was to be
examined at least annually for impairment and written
down if found to be impaired. If elected, the new
accounting policy still requires testing for impairment at
either the entity level of reporting unit level when a
triggering event occurs.

HP written-down the valuation of goodwill unreasonably

05
The Consequence
 On July 31, 2011, HP had a market
value of $72 billion.
Three months later, after the
Consequence completion of the acquisition, HP
had lost $26 billion of its market
value, representing a 37 percent
decline in its stock price in just
three months. Over the next 12
months, the cumulative decline in
market value reached $45 billion,
representing a 61 percent decline.
 THANK YOU
FOR LISTENING
Autonomy’s frauds HP’s errors

Income Statement Valueted the Autonomy’s valuation carelessly

Overprice

Purchased price = $11 bill with $ 6.4 bill

is intangible assets and $ 4.6 is goodwill

Goodwill and Intangible assets was

Revenue is
overstated
Financial situation looked more
attractive for investors
estimated unrealiably
Written-down the goodwill by an
unaccpected amount ($ 8 bill) .