HP Got Autonomy Audit Reports Showing Hardware Sales, FT Says

Hewlett Packard Co. managers received information on Autonomy Corp.’s accounting in the months before a whistle-blower flagged practices and prompted a writedown, the Financial Times reported.

Autonomy’s practice of selling hardware to clients at a loss had been documented by auditors, and a description was provided to Hewlett Packard after it bought the U.K. software maker, the newspaper said, citing the records and an unidentified person familiar with the finances. HP was later alerted by the whistle-blower and has claimed that the practices were misleading.

Former Autonomy Chief Executive Officer Mike Lynch said the newspaper’s account undermines accusations by Hewlett Packard CEO Meg Whitman. Hewlett Packard paid $11.1 billion for Autonomy in 2011, and took an $8.8 billion writedown in November 2012, attributing more than $5 billion to Autonomy’s accounting, including the hardware sales.

Autonomy’s former managers, including Lynch, have denied wrongdoing and said that Hewlett Packard mismanaged Autonomy after the deal.

An audit from December 2010 said 9 percent of sales were hardware -- comparable to the 10 percent to 15 percent of sales that HP cited as showing the extent of the allegedly misleading accounts, the FT said. Whitman was copied on an October 2011 e-mail about Autonomy’s difficulties selling Hewlett Packard hardware that referenced its experience selling Dell Inc. equipment, the Financial Times said, citing the correspondence.

‘Open, Transparent’

Hewlett Packard said that while it eventually learned about the hardware sales, it knew nothing of accounting improprieties until the whistle-blower came forward, according to the FT.

Sarah Pompei, a spokeswoman for the Palo Alto, California-based company, didn’t return a call and e-mail requesting comment outside normal business hours.

“Meg Whitman accused Autonomy of ‘active concealment’ but these revelations prove we were open and transparent with our auditors who continue to stand by the accounts,” Lynch said in an e-mailed statement about the FT article. “Meg Whitman must answer to her shareholders with what she knew, when she knew it and how she and her senior colleagues made such factually incorrect and serious statements that were so easy to check from the audit packs.”

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