HP Showed ‘Willful Blindness’ on Autonomy: Chanos

Wednesday, 21 Nov 2012 | 12:10 PM ET

Hewlett-Packard showed "willful blindness" to the accounting problems at software firm Autonomy, noted short-sell Jim Chanos told CNBC's "Squawk Box" on Wednesday.

Bloomberg | Getty Images

"This whole thing is a debacle and probably should have never happened," the founder of Kynikos Associates said. "We had been short Autonomy in our European fund in 2010 and 2011, and watched in horror as it was taken out at a big premium by Hewlett-Packard . It was one of our absolute favorite shorts at the time."

He said that the accounting problems were hard to miss and that HP showed "willful blindness" in ignoring the warning signs. (Read More: How Jim Chanos Spotted the HP Scandal)

"It was pretty clear if you look at Autonomy's books over time that it was a very, very aggressive roll-up," Chanos said. "It was buying other companies. It was writing them down before it bought them and putting all kinds of goodwill on its books, which most accounting mavens know is a real way to play earnings games if you want to."

HP's 'Willful Blindness' on Autonomy Deal: Chanos
Jim Chanos, Kynikos Associates, explains his short position on Hewlett-Packard and why he believes the company's acquisition strategy has destroyed value.

Chanos also noted that there were a number of sell-side analysts on top of the short sellers who were also skeptical of Autonomy. (Read More: Analysts Had Questioned Autonomy's Accounting Years Ago.)

"There was all sorts of cookie jar accounting ... that appeared to be going on and it was hard to miss," he said.

Chanos remains short Hewlett-Packard, calling it a "value trap" until it can show it has a mobility and tablet strategy. (Read More: HP a Value Trap or Bargain Stock?)

"This is a company that, as you know, our thesis was they have been basically offsetting a decline in their business by making acquisitions," Chanos said. "In this case, almost disastrous acquisitions."


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