Ritholtz: HP Is “the Epitome of a Value Trap” After “Embarrassing Debacle”

Ritholtz: HP Is “the Epitome of a Value Trap” After “Embarrassing Debacle”

Hewlett-Packard (HPQ) shares fell over of about 12% to a 10-year low Tuesday after the company announced a shocking $8.8 billion write-down and dismal quarterly results.

HP acquired London's Autonomy for $11 billion in a bid to move deeper into software and services in 2011. HP now says it was duped, citing "serious accounting improprieties" in announcing the write-down, of which over $5 billion was related to accounting issues and the rest due to the division's poor performance.

HP's founder Michael Lynch vehemently disputed HP's claim of wrongdoing, leading many observers to wonder whether HP was really the victim of accounting fraud or is just using these alleged accounting issues as an excuse to mask its poor performance.

"The mind boggles as to where the snafu was," says Barry Ritholtz, CEO of Fusion IQ and author of The Big Picture blog, who notes the accounting industry is once again left with another black eye and with shareholders holding the bag.

"I'm not just talking about HP," he says. "This is a mainstream part of finance and quite frankly an embarrassing debacle."

Beyond questions over the potential failings of audit firms Deloitte UK and KPMG, HP's board and its finance team, "to me this is just another bad HP acquisition," Ritholtz says. "They were once a wonderful, storied company. Now they need to figure out who they are."

For shareholders, this is the critical question because the Autonomy write-down and drama over the allegations served to somewhat obscure another lousy quarter for HP overall.

For its fiscal fourth quarter, HP reported poor performance across the board as revenues fell in its PC, printer, services, and server and networking divisions. HP reported a 7% drop in revenue vs. a year ago and a whopping loss of $6.9 billion.

Posted by James Fried on Tuesday November 27 2012, 5:51 AM EST. Ref: Reuters. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0