The Motley Fool Previous Page

Bad Earnings at 2 Companies Send Stocks Down

John Maxfield
November 20, 2012

Stocks are headed for a lower close today following a handful of disappointing earnings releases. As of 2:55 p.m. EST, the Dow Jones Industrial Average (INDEX: ^DJI  ) is down by 36 points, or 0.28%.

The disaster that is HP
Shares in Hewlett-Packard (NYSE: HPQ  ) are down in the double digits after the personal-computer maker reported quarterly earnings that were far below analysts' expectations. Analysts were surprised by an $8.8 billion goodwill charge-off that HP recognized during the quarter related to its 2011 acquisition of the U.K. software maker Autonomy.

The drama surrounding this has grown throughout the day. It started this morning when HP CEO Meg Whitman acknowledged that an internal review of the deal revealed "serious accounting improprieties" and "outright misrepresentations" on the part of Automony's executives. More specifically, according to The Wall Street Journal, it's alleged that the software maker intentionally mischaracterized low-margin sales of hardware as sales of software, which carries a higher margin, and that it recognized revenue in some cases where no sale actually occurred. HP has purportedly asked the SEC to look into the matter.

Following these allegations, the executive in charge of HP at the time of the deal, Leo Apotheker, immediately went on the defensive, saying:

Looking back on the acquisition, w