HP stunned markets by announcing that it is taking a massive $8.48 billion hit against its acquisition of British software house Autonomy in its fourth quarter results announced overnight.

"The majority of this impairment charge is linked to serious accounting improprieties, disclosure failures and outright misrepresentations that occurred prior to HP's acquisition of Autonomy and the associated impact on the expected financial performance of the business over the long term," CEO Meg Whitman said during the results announcement.
"We did a whole host of due diligence but when you're lied to, it's hard to find," Whitman said.
Hardware sales at Autonomy were allegedly reported as software revenues, inflating both overall earnings and profit margins, according to Whitman.
While HP was told Autonony's margins were between 40 and 45 percent, the company now believes they are between 20 and 28 percent instead.
As a result of the impairment charge, HP made a US$6.5 billion ($6.27 billion) loss in the fourth quarter.
Whitman said the improprieties were discovered through an internal investigation after a senior member of Autonomy's leadership team came forward following the departure of the Briish company's then-chief executive Mike Lynch on May 23.
Lynch "flatly rejected" the allegations through a spokeswoman, who told Reuters that "the former management team of Autonomy was shocked to see this statement today, and flatly rejects these allegations, which are false."
"HP's due diligence review was intensive, overseen on behalf of HP by KPMG, Barclays and Perella Weinberg. HP's senior management has also been closely involved with running Autonomy for the past year," the spokeswoman said.
The US IT giant has asked the enforcement division at the SEC and the Serious Fraud Office in the UK to open criminal and civil investigations.
HP said it intended to seek redress against various parties in the appropriate civil courts as well.
Despite this, Whitman said HP remains 100 percent committed to Autonomy and what she calls "its industry-leading technology".