Hewlett-Packard now has a legal headache tocompound its misery as the company tries to recover from a series of setbacksthat have hammered its stock price and raised doubts about its future.
An HP stockholder who owns 200 shares is suing the companyin a complaint that alleges management concealed problems in two keyacquisitions that have turned into financial albatrosses.
The lawsuit filed Monday in a San Francisco federal courtcomes after Hewlett-Packard Co. stunned Wall Street last week with its ownallegations of accounting shenanigans at Autonomy, a business software makeracquired for $10 billion last year. HP referred its findings about the allegedfraud to securities regulators in the U.S., and the United Kingdom, whereAutonomy was based before the acquisition.
Other shareholder lawsuits are likely as investors try torecover some of the wealth that has evaporated since HP replaced Mark Hurd asits CEO in August 2010.
The revelations of a suspected accounting scandal withinAutonomy caused already skittish investors to dump HP's stock. HP had alreadybeen losing favor because its personal computer and printer businesses havebeen faltering as more people buy smartphones and tablet computers.
To make matters worse, HP disclosed in August that its $13billion acquisition of technology consulting service Electronic Data Systemswasn't working out as well as management envisioned.
The trouble in Autonomy and EDS has forced HP to absorbnearly $17 billion in accounting charges in the past two quarters, resulting inthe biggest losses in the company's 73-year history. The Autonomy deal wasnegotiated while HP was being run by Leo Apotheker, who was ousted 14 monthsago. The EDS acquisition closed in 2008 when Hurd was still in charge.
Monday's lawsuit filed by shareholder Allen Nicolow alsoalleges that HP knew that the EDS and Autonomy deals were duds long beforemanagement acknowledged the problems. The complaint alleges HP's managementtried to whitewash things in an attempt to prop up the company's stock price.
HP, which is based in Palo Alto, California, declined tocomment on the lawsuit.
HP's shares closed Monday at $12.74, leaving them worth lesshalf their value at the beginning of the year. The shares peaked this year at$30 in February. Nicolow bought 200 shares of HP stock at $21.87 in May,leaving him with a paper loss of about $1,900 at Monday's close.
Nicolow's lawyers are hoping to get the lawsuit certified asa class-action representing all HP shareholders who bought the company's stockbetween Aug. 19, 2011 and Nov. 20 this year.
The lawsuit seeks unspecified damages from the company,Apotheker and current HP CEO Meg Whitman. Catherine Lesjak, HP's chieffinancial officer, and James Murrin, the company's chief accounting officer arealso named as defendants.
In statements last week, Whitman said HP didn't learn aboutAutonomy's alleged accounting ruse until a whistleblower alerted her after shereplaced Autonomy CEO Mike Lynch in May. Lynch maintains Autonomy did nothingwrong and that HP came up with the allegations of deceptive accounting to coverup the damage caused by its own bad management.