Page 1

From L.P., a Blunder That Looks to Beat All in 2,000, a deal that came to define the folly of the Internet bubble. It destroyed shareholder value, ended careers and nearly capsized the surviving AOL Time Warner. Enlarge This Image Ryan Anson/Bloomberg economic news , via Getty Pictures Leo Apotheker, chief executive of HewlettPackard, with Catherine A. Lesjak, its chief financial officer, at a gathering in March 2011. Ms. Lesjak firmly opposed the acquisition of Autonomy. Add to Portfolio HewlettPackard Company Head to your own Portfolio " The deal was considered so poor, and this kind of object lesson for a generation of deal makers and corporate executives, that it looked likely to never be repeated, rivaled or surpassed.

Until now. Hewlett-Packard's acquisition last year of the British pc software manufacturer Autonomy for $11.1 billion "may be worse than Time Warner," Toni Sacconaghi, the respected technology

analyst at Sanford C. Bernstein, told me, a view which was echoed this week by a few H.P. analysts, opponents and disgruntled investors. Last week, H.P. stunned investors still reeling from more than a year of direction upheavals, corporate blunders and disappointing earnings when it said it was writing down $8.8 billion of its own acquisition of Autonomy, in place acknowledging that the business was worth an astonishing 79 percent less than H.P. had paid for it. And it credited more than $5 billion of the writeoff to what it called a "willful attempt on behalf of certain former Autonomy employees to inflate the underlying financial metrics of the company to be able to mislead investors and potential buyers," adding, "These misrepresentations and too little disclosure badly affected H.P. management's ability to fairly value Autonomy during the time of the offer." In an unusually aggressive public relations counter-attack, Autonomy's founder, Michael Lynch, a Cambridgeeducated Ph.D., has denied the charges and accused HewlettPackard o f mismanaging the acquisition. H.P. asked Mr. Lynch to step aside last May after Autonomy's results fell far short of expectations. But others say the problem of fraud, even though it may offer a face-saving justification for at least some of H.P.'s enormous writedown, shouldn't veil the truth the deal was extremely overpriced from the start, that at least some individuals at HewlettPackard recognized that, and that H.P.'s chairman, Ray Lane, along with the board that approved the deal should be held accountable. A Hewlett Packard spokesman said in a statement: It goes without saying that they are disappointed that much of the information they relied upon appears to have been controlled or erroneous." It's true that H.P. directors and management cannot be attributed for a fraud that eluded teams of bankers and accountants, if this's what it actually is. But, the huge writedown and also the disappointing results at Autonomy, combined with other missteps, have led to the widespread awareness that H.P., once one of the state's most admired companies, has lost its way.