Hewlett-Packard (HPQ) Stock Dropping After Agreeing to Settle Autonomy Lawsuit

NEW YORK (TheStreet) -- Shares of Hewlett-Packard (HPQ) are dropping by 0.12% to $32.65 after the company today agreed to pay $100 million to its investors to settle claims that they were misled about the $10 billion acquisition of British software maker Autonomy.

HP acquired Autonomy in 2011 but was forced to write down its value by $8.8 billion only a year later. HP said at the time of the write-down that it had been duped into overpaying for the acquisition. Shortly after, investors saw the values of their shares tumble, Reuters reported.

Leading the class-action lawsuit is PGGM, a Dutch pension fund manager who alleged that HP made "materially false statements and omissions" about the price it paid for Autonomy, according to The Financial Times.

"We hope this victory will set a precedent and make companies think again before they make statements that are not supported by facts," legal counsel Femke Hendriks at PGGM stated.

Even though HP believes the lawsuit has no merit, "it is desirable and beneficial to HP and its shareholders to settle the case as further litigation would be burdensome and protracted," Hewlett-Packard said in a statement.

Separately, TheStreet Ratings team rates HEWLETT-PACKARD CO as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate HEWLETT-PACKARD CO (HPQ) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. Among the primary strengths of the company is its attractive valuation levels, considering its current price compared to earnings, book value and other measures. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • HEWLETT-PACKARD CO's earnings per share declined by 16.7% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, HEWLETT-PACKARD CO's EPS of $2.62 remained unchanged from the prior years' EPS of $2.62. This year, the market expects an improvement in earnings ($3.65 versus $2.62).
  • The revenue fell significantly faster than the industry average of 33.3%. Since the same quarter one year prior, revenues slightly dropped by 6.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • HPQ's debt-to-equity ratio of 0.79 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that HPQ's debt-to-equity ratio is mixed in its results, the company's quick ratio of 0.69 is low and demonstrates weak liquidity.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Computers & Peripherals industry and the overall market on the basis of return on equity, HEWLETT-PACKARD CO has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • You can view the full analysis from the report here: HPQ Ratings Report

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