Staggering, but what you have come to expect from Hewlett-Packard (HPQ).
That's how I feel about this revelation about Autonomy's fraudulent accounting. You had a company that so many people thought was overvalued being bought by a CEO who was clearly overvalued, OK'd by a board that had no value. I don't know a soul who thought this deal was a good one to begin with except Leo Apotheker, at least at the price it was going to pay. Lest we forget, Oracle did want to buy them for $6 billion, $4 billion less that HPQ paid. But I could argue, shrewd acquirer that he is, Larry Ellison would not have gone through with this transaction.
Now here's what matters. Even though the fraud was at a company acquired by HPQ, my "accounting irregularities equal sell" dictates selling a company I have been telling you to sell for months and months now.
I was impressed by the fact that the cash flow for the company is holding up despite the declining hardware and software businesses here. The personal computer business fell 14%, printing declined 5%, services dropped 6% and enterprise servers saw a 9% decline.But, frankly, so what? You can only cut back so much before declines like that just wipe your business out. The idea that Meg Whitman is still buying back shares and paying dividends after these shocking declines and the Autonomy fiasco is a little disappointing. After all, this is hardly a debt-free company. But I think she wanted to show that the company truly does generate cash, so she's sticking by the projections for next year and is pounding the table on the cash generation. But the simple fact is that despite this company's amazing pedigree and its 60-year experience, it is a totally broken enterprise going the way of BUNCH (Burroughs, Univac, NCR, Control Data and Honeywell). Those were all once computer companies that had to give up and throw in the towel. NCR saved itself by becoming a force in ATMs, as well as maintaining its register business. Honeywell became a diversified maker of pretty much everything but computers. Control Data managed to cobble together some service businesses that were spun off and ultimately sold to create value and Burroughs and Univac combined to become Unisys. It's the latter that feels a heck of a lot like the future of Hewlett-Packard.
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