Hewlett-Packard's history of failed acquisitions

HP in Talks to Buy Aruba Networks for Wi-Fi Infrastructure
Excerpt:

Hewlett-Packard Co. is in talks to acquire Aruba Networks Inc., a maker of wireless-network infrastructure used by hotels, universities and shopping malls, people with knowledge of the matter said. The purchase may be announced as soon as next week, said one of the people, asking not to be identified discussing private information. The deal hasn’t been completed and the talks could still fall through.

Comment: See HP - "value destruction through acquisition" AND The financial firms behind the Autonomy deal AND Blue Chip or Cow Chip. Comments Boeing is mentioned in the Cow Chip article. BA has been a great stock for us. I actually bought HPQ , held it to LONG TERM and sold it at a profit. I regard HP as "Cow Chip". Also consider the WebOS debacle.

HP's "Project Tesla"

How a desperate HP suspended disbelief for Autonomy deal
Excerpt:

After two months of negotiations on what was known at HP as "Project Tesla," Apotheker sat down with Lynch at a hotel in Deauville on the Normandy coast - and shook hands on what would become an $11.1 billion deal.

The Autonomy takeover was indeed a bombshell - but not in the way that Apotheker had hoped. When it was announced in August 2011, HP's stock plummeted amid withering criticism of the price tag.

Within weeks, Apotheker was out of a job. Within months, Lynch and his new masters at HP were at war. Inside a year, Lynch had been forced out and HP was investigating allegations of major accounting irregularities at Autonomy. That culminated in HP saying last week it was writing off more than three-quarters of the value of Autonomy, and telling U.S. and UK regulators about alleged accounting fraud.

... While the price haggling was going on, a large due diligence team numbering in the hundreds, including internal HP staff from all relevant departments like finance, poured over Autonomy's books, examined contracts, and interviewed Autonomy's top executives, sources said. External experts involved in the process included accounting firm KPMG, law firms and bankers.

Due diligence was seen being straightforward as Autonomy had been filing its accounts publicly and they had been audited. One source said the month-long process was extensive and meticulous but nothing special.

Comment: Much more in the article about the due diligence process. Image source. And what was the end of Nikola Tesla? (Wiki article): "He died penniless and in debt "

The financial firms behind the Autonomy deal

HP’s Autonomy Debacle: Whose Fault Is It Anyway?
Excerpt:

That’s $68.8 million in advisory fees to these eight firms – of which HP contributed $30.1 million. At the end of it, the deal was finalized at the inflated value of $11.2 billion for Autonomy, with an almost unanimous approval from the shareholders and boards on both sides.

As the Feds and the SEC dig into Autonomy’s reported numbers to verify whether it indeed was cooking its books, the big question that demands an answer is how did so many smart people missed this when it really mattered. There are a lot of ‘maybes’ involved in this entire drama: Maybe Autonomy did misrepresent its numbers intentionally. Maybe HP realized that there was an accounting issue AND that the technology business itself was not worth its initial estimate and so it decided to go in for a “big bath” write-off. Maybe Deloitte thought that the way Autonomy was reporting numbers was just a small aberration that everyone would overlook. And maybe the investment banks who advised really believed that the deal was being valued accurately.

The result – on a deal worth $11.2 billion, HP takes a $8.8 billion write-off. So what, Autonomy was/is worth $2.4 billion? That hardly looks right, especially taking into account the fact that HP paid a 58% premium to Autonomy’s share price at the time of the acquisition.

It makes you wonder what the auditor and investment banks were being paid for, doesn’t it?

Comment: Not unlike Arthur Andersen's auditing Enron!

HP - "value destruction through acquisition"

How Jim Chanos Spotted the HP Scandal

Excerpt:

Although some investors believed that HP was cheap enough to be considered a "value stock" because its price-to-earnings ratio was relatively low compared to competitors, Chanos said that HP appeared to be masking the true costs of its basic R&D costs with spending through acquisitions. If those costs were expensed as operating costs rather than capitalized as acquisitions, then revenues and cash flow at HP were basically flat, Chanos said.

Chanos said that the attempt to grow through acquisitions-HP had done $37 billion in acquisitions over the last four to five years-had not paid off for HP and that its core businesses were struggling. The personal computing market, in particular, was under assault from mobile technology, with people increasingly abandoning laptops for tablets. The company was engaged in "value destruction through acquisition," Chanos said.

Comment: List of HP acquisitions. Today's HP news is the Autonomy deal. A previous failing (in my view) acquisition was the Palm deal.

Following a series of mergers and acquisitions, HP represents a combination of Apollo, DEC, Compaq, 3Com and Palm

Comment: The stock, HPQ, pays a nice dividend but if your losing money you can't pay that dividend for long. HPQ and BAC are a drag on the Dow Jones Industrial Average (both being components)

WebOS goes open source

Hewlett-Packard Gets Zilch for WebOS

Excerpt:

Hewlett-Packard bought Palm last year in a $1.8 billion deal. And now, H-P is making the guts of Palm free for the world. Hooray for the world! Bad for H-P.

Comment: My daughter had a WebOS Palm phone. Strikes me that it outshines Apple's iOS. Because of this misstep and others (exit the PC business) (never mind) Hewlett-Packard Company (HPQ) is not on my investing radar.