HP’s cup of woes is brimming over

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SummaryWhen things start to go wrong it can go pretty much completely wrong. Hewlett-Packard must be feeling the same way right now.

When things start to go wrong it can go pretty much completely wrong. Hewlett-Packard (HP) must be feeling the same way right now. It has been an uphill battle for HP for some time with personal computers the world over giving way to tablets and its business strategies across functions being questioned by hardliners. And if that’s not enough, the firm has been sued by an investor over a $8.8 billion write-down, that the tech major had said was related partly to alleged financial accounting irregularities at Autonomy Corp, the UK-based software company that it purchased last year. This kind of distraction is something HP can ill afford in a world dominated by Apple and Google, companies that have pushed PC majors like HP and Dell to the background.

The shareholder in his complaint has alleged that HP had tried to cover up that it had gained control of Autonomy based on falsified financial statements. HP’s CEO Meg Whitman and its former CEO Leo Apothekar are both named defendants in the case. Autonomy chief executive Mike Lynch has written a letter to HP’s board demanding details of the allegations that he and his team inflated revenue and gross margins. But HP has not yielded to such a request. HP had submitted documents to SEC and Department of Justice detailing the charges. HP had acquired Autonomy last year for $11 billion. The recent events have again pointed to HP’s effectiveness or the lack of it, when it comes to acquisitions. EDS, Palm and Compaq come to mind immediately.

Analysts say that the last quarter has been HP’s worst ever in history. Apart from having to resort to multi-billion dollar write-downs, it also registered a 5% revenue decline. Computer sales account for about a third of HP’s revenues. After she took over from Apotheker last year, Whitman had said she will focus on IT infrastructure, which she believed was HP’s key strength. This was a deviation from the stand taken by Apotheker who said software was the glue that held the company together, allowing it to thrive on the more attractive value added services sector, than PCs and servers.

In fact, last year HP had announced a proposal to put to rest its PC business, after tablets and smart phones started to hit traditional PC makers. Whitman is the one who intervened and stopped this move. Unfortunately for HP, its printer, services and

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