Scandal Scraps Weigh on H-P

Updated from 9:53 a.m. EST

For the big PC makers, earnings season is turning into scandal season.

Hewlett-Packard(HPQ Quote - Cramer on HPQ - Stock Picks) followed up a solid fiscal fourth-quarter financial report Thursday with the news that the Securities and Exchange Commission has launched a formal investigation into the company and its infamous efforts to find out who was leaking information to thepress.

The company added that the Federal Communications Commission has also requested records and information from H-P about the affair.

H-P's shares, which have proven impervious to the leak controversy during the past couple of months, slid 1.8%, or 72 cents, to $39.41 in midday trading Friday.

A day earlier, the other big PC maker, Dell(DELL Quote - Cramer on DELL - Stock Picks), revealed that it too was now the subject of a formal SEC probe -- in this case concerning certain past accountingpractices such as revenue recognition. Dell cancelled its quarterly results at the eleventh-hour citing the complexities of the ongoing investigation.

The SEC has been in informal contact with both Dell and H-P until now. By initiating a formal investigation, the commission's division of enforcement has the ability to use subpoenas.

H-P's announcement about the SEC probe marred what had been another impressive quarter of financial results in which the Palo Alto, Calif., tech company once again surpassed Wall Street expectations.

CEO Mark Hurd said late Thursday the company's discipline in controlling costs and its share gains in key markets resulted in the most balanced profitability across H-P's various businesses in many years.

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