HP rebuffs ex-Autonomy CEO, warns of legal action

A HP Invent logo is pictured in front of Hewlett-Packard international offices in Meyrin near Geneva August 4, 2009.

Credit: Reuters/Denis Balibouse

SAN FRANCISCO | Tue Nov 27, 2012 2:50pm EST

SAN FRANCISCO (Reuters) - Hewlett Packard Co rebuffed a request by former Autonomy Chief Executive Mike Lynch to detail accusations of accounting fraud leveled against the British software company and its former executives, and challenged Lynch to submit to questions under penalty of perjury.

HP was responding to an open letter that Lynch shot to HP's board on Tuesday, asking for specifics of the U.S. company's allegations that Lynch and former Autonomy executives inflated revenue and gross margins, which HP said last week forced it to take an $8.8 billion writedown on Autonomy's value.

In his letter, Lynch again flatly rejected any accusations of impropriety, and requested that HP's board share with him the same documents it had submitted to U.S. and British regulators, including the Securities and Exchange Commission and the Department of Justice.

Tuesday's exchange between HP, the world's largest computing company by revenue, and the former chief of Autonomy, which HP acquired for upwards of $11 billion last year, escalated a row that erupted last week when HP stunned investors by publicly accusing Lynch and other unnamed executives of inflating financial results such as margins.

The revelation again brought into question the competence of HP, which has made a series of missteps in past years including failed acquisitions and poor strategic decisions.

In Tuesday's letter, Lynch challenged HP to elaborate on how it calculated the writedown, especially $5 billion that the company has said was directly attributable to accounting impropriety at Autonomy.

"Can HP really state that no part of the $5 billion writedown was, or should be, attributed to HP's operational and financial mismanagement of Autonomy since the acquisition?" Lynch asked in the letter.

HP responded by saying the matter was now in the hands of the SEC, the UK's Serious Fraud Office and the Justice Department, and that it will defer to those agencies on how to engage with Lynch. It also warned it will take legal action against "parties involved" at the appropriate time.

"While Dr. Lynch is eager for a debate, we believe the legal process is the correct method in which to bring out the facts and take action on behalf of our shareholders," HP said in an emailed response.

"In that setting, we look forward to hearing Dr. Lynch and other former Autonomy employees answer questions under penalty of perjury."

HP's shares were down 1.5 percent at $12.55 in afternoon trade on Tuesday.

Last week's announcement came alongside the disclosure of a 6.7 percent slide in quarterly revenue, and occurred just three months after the company took a writedown of almost $11 billion on its EDS services division.

HP has for years relied on deal-making, acquiring businesses ranging from EDS to Compaq to Palm, but has largely failed to articulate a clear strategy or establish a strong position in growth businesses like computer services or mobile computing.

(Reporting By Edwin Chan and Poornima Gupta; Editing by Tim Dobbyn and Steve Orlofsky)

View the original article here

This post was made using the Auto Blogging Software from WebMagnates.org This line will not appear when posts are made after activating the software to full version.

Moody's warns U.S. not to skimp on deficit cuts

A Moody's sign on the 7 World Trade Center tower is photographed in New York August 2, 2011.

Credit: Reuters/Mike Segar

By Daniel Bases

NEW YORK | Wed Nov 23, 2011 3:43pm EST

NEW YORK (Reuters) - Moody's Investors Service on Wednesday warned that its top credit rating for the United States could be in jeopardy if lawmakers backtrack on $1.2 trillion in deficit cuts planned over 10 years.

The ratings firm said the failure of a U.S. congressional committee to reach an agreement on deficit reduction did not affect the Aaa rating, but any pullback from agreed automatic cuts to take effect starting in 2013 could prompt it to take action.

"While a change in the composition of the spending cuts would not be a major rating consideration, a reduction in the total amount that would increase the projected increase in federal debt over the coming decade could have negative rating implications," Moody's said in a statement.

Investors have raised concerns that Congress might try and undo the $1.2 trillion in automatic spending cuts -- split evenly between domestic and military programs -- that are to be triggered following the failure of the 12-member congressional "super committee" to reach a deal.

Republicans are already scrambling to shield the military from $600 billion in cuts, though President Barack Obama has vowed to veto any effort to undo those cuts.

The United States already suffered a blow to its top AAA credit rating in early August, when Standard & Poor's cut its rating to AA-plus on concerns over the government's budget deficit and rising debt burden.

On Monday, S&P said the super committee's failure did not affect its current view on the rating.

The 12-member super committee, split evenly between Democrats and Republicans, abandoned its effort to reach a deal on Monday, with both sides blaming the other for the impasse.

Steven Hess, Moody's lead analyst for the United States in New York, said the committee's failure was not a surprise and said the critical factor for Moody's is the total amount of deficit cuts.

Moody's is basing its view of the current rating on the expectation that the full $2.1 trillion in deficit reduction will be carried out.

"We had been expecting there would be deficit reduction of that amount one way or the other," Hess told Reuters in a phone interview.

Moody's had placed a negative outlook on its rating on the United States on August 2, setting a general time frame of 18 months to two years in which it could decide whether to cut the rating.

Competitor Fitch, after affirming its AAA rating with a positive outlook on Monday, said the failure of the super committee "would likely result in a negative rating action -- most likely a revision of the rating outlook to negative."

Less likely would be a one-notch downgrade, Fitch said, adding that a decision would come before the end of the month.

Moody's Hess said the committee could have come up with a bigger deficit reduction package, which would have been positive for the United States' credit-worthiness, "but we didn't necessarily expect that."

"Some members of Congress appear to favor changing the mix of these spending cuts to lessen the impact on defense spending," Moody's said in its statement.

Hess said the composition of the spending cuts was not a major consideration.

"Well, not in a big way. A thorough analysis could indicate that it would have a marginal effect on the rate of economic growth over time depending on the composition of government spending. But we think that would be marginal and not something that would really affect the rating," he said.

(Reporting by Daniel Bases and Caryn Trokie; Editing by Leslie Adler)

View the original article here