HP – revenues were lower vs reduced expectations, guidance is lower for Q1 and backend loaded for the FY, which is a lot to ask in a turn around story that has “executed” for two quarters, secular issues remain in core markets… oh, and they are writing down Autonomy by $8.8b.  Yes, that Autonomy that they acquired for $10.2b just last year.  But wait, there’s more – $5.5b is aparently due to fraud.  HP will sue.  Greeeaaaat.   A few thoughts on the write down b/f the numbers… 1) the entire board except Whitworth signed off on the deal, 2) CFO Lesjak warned the board against the deal, stating it was too expensive and not in HPs best interest, 3) HP lead council and others were aware of rumors regarding accounting irregularities at Autonomy but were “reassured” by documents provided by Autonomy management and auditors, 4) Autonomy former CEO Mike Lynch worked for HP from December ’11 until May ‘12 – after he left HP began its investigation and notified regulators but did not announce anything until today..so not only due diligence but two reporting periods of financials before HP had to be told by an insider about the issues.   There is something very wrong about this picture and the shares are being punished for it – we will report more, if relevant, as we learn it but this will take time to shake out.   How much worse can it get?  Not sure, but remain on the sidelines for now.

*revs $29.96 vs $30.4b ; EPS $1.16 vs $1.14; revs down 6.7% (-4.1% ex fx)

*operating margins: PC 3.5% (down), printing 17.5% (up), Services 14.2% (up), ESSN 8.3% (down), Software 27.2% (up)…total 10.4% up 0.7bps y/y and 1.2bps q/q

*FQ1 guide EPS 68-71c vs 85c (whisper 75-80c); maintains FY13 $3.40-3.60, but most were already skeptical…lots of 2H loading in EPS guide for lots of reasons including restructurings, new products, bad contract run offs etc.

*Printing -5%; services -6%; enterprise hardware -9%, software +14%… all decelerations except software which was very weak for the previous two quarters

*PC -12% (both Desktop and Notebooks -12%); commercial PC -13%, consumer -16%…PC oper margin fell to 3.5% from 4.7%… this is why next years EPS numbers are too high

*Printing -5%, supplies -1%, commercial hardware -13%, consumer hardware -14%; hardware units -22%

*Americas -6% y/y, EMEA -8%, APac -4%

*taking $8.8b charge related to $10.2b Autonomy acquisition; suing Autonomy and founder Mike Lynch for $5b on pre-merger misrepresentations; HPQ contacted the SEC in May after Lynch’s firing…Deloitte reviewed financials, KPMG reviewed due diligence…multi year issue, SEC then civil charges

*cash flow oper $4.1b; gross cash $11.8b; net cash $-16.4b; net cash ex fin svcs $-5.8b; cap ex only $299 vs $325m last Q and 585m last year

*weaker seasonality in 1H, stronger 2H… but not due to actual business, more the rolling of restructurings, changes, bad contracts

*conf call was unexciting… continued references to better 2H of FY13 will leave many concerned about forecasts; cash flow was better – though printing margins seem too high and cap ex was reduced.