HP’s Downfall? Look to Its Board
The finger pointing continues in the Hewlett-Packard/Autonomy fiasco. The struggling computer maker reported this month that it would take an $8.8 billion charge due to its $11.1 billion acquisition of British software company Autonomy. The write-down essentially wiped out Hewlett-Packard's (HPQ) profits in the third quarter. CEO Meg Whitman said Autonomy had inflated its value and accused the company of "serious accounting improprieties." Autonomy founder Mike Lynch characterized the attacks as H-P's "attempt to set the bar so low that you can't possibly fail," according to The New York Times. Corporate accountants for both companies have been criticized and questioned over their decision to sign off on the deal.
Related: HP Is "the Epitome of a Value Trap" After "Embarrassing Debacle": Ritholtz
Now, H-P investors have filed a lawsuit against H-P's board of directors, including Ms. Whitman, former H-P CEO Leo Apotheker, auditors Deloitte, KPMG, Barclays and Perella Weinberg Partners UK as well as Mr. Lynch. According to the complaint, "HP grossly overpaid for Autonomy…and consistently misled the public with improper statements" regarding the benefits and assets of the acquisition. Rob Cox, U.S. editor at Reuters Breakingviews, says one particular H-P director should be held liable for the disastrous deal.
"Mark Andreessen was the most vociferous proponent, banging the table about buying Autonomy," Cox says in an interview with The Daily Ticker. "He is the single most person to blame on the board for doing the Autonomy deal."
Cox describes Andreessen as a "great investor" but the tech genius and founder of web browser Netscape made an imprudent choice on Autonomy. The deal should have been highly scrutinized, especially if red flags were present when the negotiations were happening, Cox adds.
"I don't expect" someone like Andreessen "to know the accounting of any acquisition" but "as a director it's your fiduciary obligation to make sure your folks have done the due diligence," Cox argues.
In a recent Breakingviews column, Cox emphasizes that Andreessen has made other bad judgments that have had costly consequences. He pushed for H-P's $1.2 billion acquisition of Palm and convinced H-P's board to hire ex-CEO Leo Apotheker. Board members gave Andreessen "extraordinary powers," Cox writes, noting that other directors did not personally meet with Apotheker before his appointment.
"The problem for H-P is that it has a pretty crummy board," Cox says.
H-P stock fell 12% after the company reported the write-down and has barely budged after touching a 10-year low. The recent debacle has H-P investors questioning whether the computer maker can ever return to its former glory. According to Cox, H-P board members will voluntarily break up the business next year into five separate entities.
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