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Dell Saw Something HP Didn't

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The dramatic story of Hewlett-Packard's (NYSE: HPQ  ) embarrassing and inevitable impairment keeps getting juicier. The $8.8 billion writedown related to its acquisition of British software maker Autonomy included accusations of fraud and "serious accounting improprieties" that resulted in the PC giant overpaying.

Last year, Oracle (NYSE: ORCL  ) had its fun poking at HP for making the buy that it wouldn't. Through a series of press releases, the enterprise software maker told the story of how Autonomy was shopped to Oracle. The company even posted the presentation slides that were sent to HP ex-CEO Mark Hurd, who Oracle snapped up after HP ousted him. Oracle passed on the offer "because the price was way too high."

It turns out that one of HP's chief PC rivals also said "thanks, but no thanks" to Autonomy: Dell (UNKNOWN: DELL.DL  ) . Michael Dell recently told The Sunday Telegraph that Autonomy was also shopped to his company, but again the lofty asking price was the primary hurdle to negotiations. Dell added, "That was an overwhelmingly obvious conclusion that any reasonable person could draw."

Dell said the "unbelievably large premium" entailed too much risk. After all, the difference between the purchase price and book value of assets acquired inevitably becomes the ethereal accounting concept of goodwill. If things don't pan out well, some or all of that goodwill can magically disappear in a puff of impairments.

The story adds up, since from a product strategy standpoint, Dell is just as interested in moving into enterprise software as HP is. The big difference is that Dell was able to see something that HP didn't: an absurdly high premium. Dell's comments might imply that HP's ex-CEO Leo Apotheker isn't a "reasonable person," since he couldn't spot the bogus price.

Autonomy's products have never been called into question, with HP CEO Meg Whitman saying the company remains "100% committed" to its technology and employees. When it comes to acquisitions, price matters. A lot.

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