You may remember the movie, Groundhog Day. In which the protagonist, a local TV weatherman played by Bill Murray, wakes up to discover - again and again - that every day is Groundhog Day, the early February date on which the appearance - or not - of a groundhog in central Pennsylvania signals how many more weeks of winter there will be.
And what, you have every right to ask, does that have to do with HP?
Well, this: HP wakes up after every major deal it has done recently to discover that the result is the same: they overpaid. Badly. Like, in the billions.
The latest embarrassment comes approximately one year after HP paid $11 billion for Autonomy, a British software company that was supposed to launch the once venerable hardware icon into the software game. In a big way, of course, as befits HP's legendary reputation.
Except that there appear to have been some 'accounting improprieties' that got overlooked. Said improprieties being the polite term used to describe fraud before indictments have been handed down. So HP is taking an $8.8 billion write down on that purchase. Which will affect its bottom line. A lot. In fact you wont even be able to see the bottom with underwater binoculars.
We wish we could say that stuff happens and everyone makes mistakes occasionally. But stuff keeps happening to HP and no one makes these kinds of mistakes. HP must have paid investment bankers, accountants and lawyers tens of millions to do due diligence, which is financial research to make sure that there would not be any surprises. Like accounting improprieties. It will be interesting to see what they claim. The death toll in Silicon Valley will probably skyrocket due to innocent people being skewered by all the pointing fingers.
But the suspicion is that HP's famously famous and arrogant and dysfunctional board of directors probably overrode any objections raised because they thought they knew better, having their fingers on the very pulse of global tech as they purport to do. Some of them may even claim that they ARE the pulse of global tech. Except that they keep hiring and firing CEOs, changing strategies and otherwise earning HP the worst governance reputation in corporate America (or the world, for that matter).
The sad thing is that HP used to be the firm everyone looked to for sober but innovative management. Hiring good people. Treating them well. Encouraging research. Sponsoring innovative products. Making it all work for the benefit of customers, employees and shareholders. But that was back when management and governance and innovation mattered more than financial engineering. JL
Charles Cooper comments in CNET:
Rare is the big tech company that has not committed the periodic stumble. But when it comes to bungling and buffoonery, you won't find a bigger serial offender than Hewlett-Packard.
The company essentially said it got scammed into overpaying for Autonomy, the enterprise software company it bought for $11.1 billion last year. That's just the half of it because buried in its Q4 earnings release was this gem: HP is taking an $8.8 billion charge as a result of what it described as "serious accounting improprieties, disclosure failures, and outright misrepresentations at Autonomy." The stock market understandably freaked out -- HP shares fell more than 12 percent, dropping to their lowest level since October 2002,-- on yet more bad news from a company that once was synonymous with the best Silicon Valley had to offer. Who knows what happened -- or who's responsible? Former CEO Leo Apotheker, who orchestrated the Autonomy acquisition, says that the due diligence on the deal was "meticulous and thorough," while Autonomy's ex-chief Mike Lynch rejected the allegations of anything untoward. For her part, HP boss Meg Whitman was on the talk show circuit today pointing fingers because, heavens to Betsy, this surely wasn't her doing. (Whitman, who was part of the board that approved the deal, told CNBC she now regrets her vote in favor.)
In time, investigations will sort out the details, blame will get assigned and lessons will be learned -- or so we can hope. Outside of HP's small amen corner, nobody really knows the answer to the bigger, unanswered question -- whether HP will regain its mojo. Based on the evidence, this is more than the proverbial work in progress. Fresh from her defeat in California's gubernatorial campaign, Whitman was hailed as the latest savior when she took over nearly a year and a half ago. The best you can say so far is that she's outlasted her immediate predecessor, Apotheker, who was was barely around a full year. Of course, he was supposed to be the new leader to redirect the company after Mark Hurd resigned amid a 2010 ethics investigation. And, of course, Hurd, the NCR whiz kid, was brought on board to revive a company left in chaos after Carly Fiorina's controversial stewardship. It's been great fun to watch from the peanut gallery as a reporter -- unless HP was spying on you -- but much less amusing for HP shareholders and employees.
How did things turn so sour so quickly? As this brilliant May 2012 chronology in Fortune makes clear, there's more than enough blame to go around. HP's still hurting from a spending spree under Fiorina and Hurd, when the company bought 86 companies, including a couple of enormous stinkers.
•In 2008, HP bought Electronic Data Systems for nearly $14 billion as a quick fix to its consulting business. But it was late here playing catch-up with IBM -- Big Blue had bought PricewaterhouseCoopers in 2002 for $3.4 billion -- and HP reacted by wildly overpaying. Last quarter the company announced an $8 billion charge on the deal.
•In 2001, HP paid $25 billion to buy Compaq. A decade later, HP took a $1.2 billion write-down related to the acquisition. Truth be told, I thought the deal had potential when it came down. In retrospect, it turned out to be an expensive bust.
No sense in going on as what's past is past, but this is getting old. A good chunk of the board of directors was reconstituted last year but some of the folks who thought paying all that money for Autonomy was smart are still around. Do they still believe HP can buy its way back to leadership? Does Whitman? Questions for another day as Silicon Valley is rooting for Whitman to succeed. As it should. Nobody wants her to fail and this company is too important to the American industry to wind up as the second coming of Sperry-Rand. That's not imminent, but if HP can't shake off this nagging "Groundhog Day" syndrome,the past will be prologue and an American icon will have turned into an American laughing stock.
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