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HP Goes Radio Silent Into 2013 on Autonomy Debacle


Hewlett-Packard (NYSE:HPQ) set off fireworks in November when it said it was the victim of an accounting fraud related to its $11.1 billion acquisition of British software specialist Autonomy. Now, a late Thursday filing shows the US Department of Justice is investigating HP's Autonomy unit.

However, the company remains notably silent on the investigation and is likely to have little new to say about the Autonomy deal in 2013.

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As enforcement agencies pick up what HP said started as an internal investigation on whistleblower claims of fraud, all signs point to the company maintaining silence on those allegations now that legal authorities are investigating them.

HP's silence is consistent with its previous statements when first disclosing the fraud allegations; however, it also means the investigation may prove to be a distraction in 2013 as the PC giant tries to execute on a highly uncertain software and services transformation.

Meanwhile, the investigation may be a crucial test to HP chief executive Meg Whitman's reputation after she and the company's board supported the Autonomy deal in late 2011 and pinned most of this year's writedown on the recently uncovered alleged fraud.

HP shares, which are the worst performer in the Dow Jones Industrial Average in 2012, fell nearly 2% in early Friday trading to $13.73, putting year-to-date losses at over 45%.

In November, HP recorded a $8.8 billion fourth quarter writedown of Autonomy, erasing most of the software analytics unit's value to shareholders, and casting in doubt the company's efforts to remake itself into the mold of IBM (NYSE:IBM).

HP attributed the majority of the writedown to an accounting fraud perpetrated by the company prior to its Aug. 2011 acquisition and said it has referred the charges to Britain's Serious Fraud Office, the DoJ and the Securities and Exchange Commission. HP also said that fraud charges relate to Autonomy's recognition of revenue and that the company opened an investigation when an Autonomy executive came forward with the fraud.

"HP is extremely disappointed to find that some former members of Autonomy's management team used accounting improprieties, misrepresentations, and disclosure failures to inflate the underlying financial metrics of the company, prior to Autonomy's acquisition by HP. These efforts appear to have been a willful effort to mislead investors and potential buyers, and severely impacted HP management's ability to fairly value Autonomy at the time of the deal," HP said.

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