HP's Autonomy deal highlights pattern of bad ideas

"I don't see how anyone could invest in this company any longer,'' said ISI Group analyst Brian Marshall, who described HP as "an unmitigated train wreck.''

HP's stock plunged $1.59, or nearly 12 percent, to finish Tuesday at $11.71. The shares haven't closed this low since October 2002 when HP was still facing a shareholder backlash over its acquisition of rival Compaq Computer.

That deal has turned out better than the acquisitions HP has made during the past five years under three different CEOs. In that time, HP has spent more than $40 billion to buy dozens of companies. In a reflection of how poorly the biggest of those deals have performed, HP's market value has fallen to just $23 billion. That's about 70 percent less than what HP was worth in June 2007 when the first iPhone went on sale.

In the last three months, HP has absorbed nearly $17 billion in non-cash charges to account for the diminished value of its 2008 acquisition of technology consulting service Electronic Data Systems and its 2011 purchase Autonomy. Last year, HP took a nearly $900 million hit for its purchase of device maker Palm Inc.

Other deals for computer networking gear maker 3Com ($2.7 billion deal), data storage service 3Par $2.4 billion) and software maker ArcSight ($1.5 billion) are working out better, so far.

But the Autonomy deal never seemed to make sense to anyone outside HP.

"Something smelled bad about it from the beginning,'' said 451 Research analyst Alan Pelz-Sharpe, who has been following Autonomy since the company went public in 1998.

Autonomy, which was based in Cambridge, England, had been known for a "dog-eat-dog'' sales culture that drove employees to do whatever it took to hit their quarterly targets or risk incurring the wrath of CEO Mike Lynch, Pelz-Sharpe said. "It was never a happy company,'' the analyst said. "It was always a place where people were frightened to speak out.''

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