$9bn Autonomy scam at Hewlett-Packard
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"Most of the board was here and voted for this deal, and we feel terribly about that," said Whitman on a call with analysts. "The board relied on audited financials, audited by Deloitte. Not Brand X accounting firm, but Deloitte," she said, adding that KPMG was hired to audit Deloitte.
"Neither of them saw what we now see after someone came forward to point us in the right direction," Whitman said.
INFLATED SALES, REVENUE
HP alleged that Autonomy's former management inflated revenue and gross margins to mislead potential buyers. It said Autonomy executives mischaracterized revenue from low-end hardware sales as software sales and booked some licensing deals with partners as revenue, even though no customer bought products.
HP said Autonomy claimed its gross margins were in the 40 percent to 45 percent range while realistically they were in the 28 percent to 30 percent range.
Moreover, Autonomy always represented itself as a software firm but 10 percent to 15 percent of its revenue came from money-losing sales of low-end hardware, HP said.
The company also claimed that Autonomy was booking licensing revenue upfront before deals closed.
HP has embarked on an internal investigation, including a forensic review by PricewaterhouseCoopers of Autonomy's historical financial results, under HP General Counsel John Schultz after the whistleblower came forward in May.
Schultz said since the accounting troubles occurred prior to the acquisition of Autonomy, it took a long time before HP was in a position to make the news public.
"Not surprisingly, Autonomy did not have sitting on a shelf somewhere a set of well-maintained books that would walk you through what was actually happening from a financial perspective inside the company," he said. "Indeed critical documents were missing from the obvious places, and it required that we look in every nook and cranny."