February 27, 2013, 12:03 AM — An investor advisor group is asking shareholders of Hewlett-Packard not to re-elect two long-standing board members and to oppose the ratification of the company's audit firm in connection with the continuing controversy over the company's purchase of Autonomy.
HP met with shareholder groups this week, though it is not clear whether there has been a resolution on the issues, a source said.
The company said in November it was taking a US$8.8 billion charge as a result of what it called serious accounting improprieties at U.K. software company Autonomy before it acquired the firm in 2011.
The shareholders are being asked to vote against the re-election of directors G. Kennedy Thompson and John L. Hammergren, and the ratification of Ernst & Young as independent auditor at HP's annual meeting on March 20.
"During Mr. Hammergren's tenure HP has pursued acquisitions including EDS, Palm, and Autonomy that have resulted in approximately $19 billion in write downs, strongly suggesting that HP was overpaying for these companies," said Richard Clayton, research director at CtW Investment Group, in a letter to shareholders on Monday. Hammergren is the longest-serving director on HP's board.
HP acquired Electronic Data Systems in 2008 for $13.9 billion to boost its revenue from IT services. The $10.3 billion acquisition of information management company Autonomy was also aimed to grow its software and enterprise business.
In December, HP said in a regulatory filing that it was informed in November by representatives of the U.S. Department of Justice that it had opened an investigation relating to Autonomy. There have also been reports that HP was approached by competitors interested in buying its EDS and Autonomy units, particularly after the company said in a regulatory filing that it would consider divesting parts of its business that "may no longer help us meet our objectives."
CtW works with pension funds sponsored by affiliates of Change to Win -- a federation of unions representing over six million members. The funds are substantial HP shareholders, Clayton said, without disclosing the precise shareholding.
Since last year's annual meeting, HP has announced approximately $17 billion in write-downs associated with past acquisitions, including the $8.8 billion attributable to the acquisition of Autonomy, CtW said.