Lynch. (The Telegraph)

In the hours since Hewlett-Packard stunned investors by announcing an $8.8 billion loss on its acquisition of Autonomy, competing narratives have emerged to describe just what went wrong.

H-P spoke first, explaining that "accounting improprieties" and "outright misrepresentations" committed before it acquired the British search engine maker for $11.1 billion last year led to today's write-down. Former Autonomy CEO Mike Lynch said that the deal was vetted by a small army of accountants and bankers, and that internal problems at the Silicon Valley giant are responsible for Autonomy's troubles.

Which one should you believe? Betabeat breaks it down.

What H-P said

In H-P 's telling, it agreed to pay too much for the British search engine maker back in August 2011, back when, ahem, the Silicon Valley giant was helmed by an executive, former CEO Leo Apotheker, who is no longer with the company. In that version, the little matter of "a willful effort on behalf of certain former Autonomy employees to inflate the underlying financial metrics of the company in order to mislead investors and potential buyers" caused H-P to overvalue the company.

The claim that "certain employees" of Autonomy defrauded H-P and its shareholders is no small charge (and $8.8 billion isn't a small amount); CEO Meg Whitman promised to raise the hounds—U.S. and U.K. regulators, anyway—to make sure that the perpetrators of the apparent fraud are punished, and to pursue civil litigation against the people responsible for the fraud.

The Autonomy story

Former Autonomy CEO Mr. Lynch wasn't named anywhere in H-P's statement, but he's responded like a man on public trial, stressing to The Wall Street Journal that the deal went through a "meticulous" vetting process overseen by hundreds of auditors and bankers, then taking note that the H-P's announcement was "coincident with them releasing the worst set of results in their 70-year company history."

That wasn't all: Mr. Lynch stayed available, repeating his story ("it's completely and utterly wrong") to reporters from various outlets, and arguing that H-P abandoned Autonomy after Mr. Apotheker was forced out of the company and the software maker lost ground amid "petty infighting."

As far as which narrative to believe, at some point the proof will be in the pudding—H-P is said to have discovered the "accounting improprieties" (such a dainty way to explain away an $8.8 billion loss!) after an Autonomy executive blew the whistle, and we expect regulators and plaintiff's attorneys alike will be working hard to put some meat on the bones of H-P's claims.

The third party

In the meantime, it's worth noting that Jim Chanos, the Kynikos Associates hedge fund manager known for betting against Enron, seems to have been onto Autonomy for a while. Per Bloomberg:

Chanos, speaking at an investor conference in July, said Autonomy’s accounting was “dreadful,” and that Hewlett-Packard “did almost no due diligence” before acquiring the company. Chanos oversees $6 billion at Kynikos Associates Ltd.

And if we had to stake our life on the word of an army of faceless accountants pushing paper around under pressure from their client to complete a deal, or the conviction of a billionaire short-seller with skin in the game, we'd feel a lot safer going with the latter.

Whitman. (Photo: Max Morse)

Hewlett-Packard took an $8.8 billion charge against fourth-quarter earnings after uncovering "serious accounting improprieties, disclosure failures and outright misrepresentations" at Autonomy, the British software maker H-P acquired last year, the company said today.

That's a large loss by any measure, and looks all the uglier given that former CEO Leo Apotheker paid $11.1 billion for the search engine developer just last August in an attempt to compete in the enterprise software market. Drill down on the corporate speak—and set aside H-P's claim that it remains "100 percent committed” to Autonomy's "industry-leading technology"—and it sounds like the company simply bought a bill of goods:

As a result of that investigation, HP now believes that Autonomy was substantially overvalued at the time of its acquisition due to the misstatement of Autonomy’s financial performance, including its revenue, core growth rate and gross margins, and the misrepresentation of its business mix.

This appears to have been a willful effort on behalf of certain former Autonomy employees to inflate the underlying financial metrics of the company in order to mislead investors and potential buyers. These misrepresentations and lack of disclosure severely impacted HP management’s ability to fairly value Autonomy at the time of the deal.

News of the write-down overshadowed generally disappointing results, in which revenue, operating margins and earnings per share declined. "Fiscal 2012 was the first year in a multiyear journey to turn H-P around,” CEO Meg Whitman said in a statement.

Meanwhile, Ms. Whitman said during a conference call this morning that the company has shared its findings with the Securities and Exchange Commission, as well as the U.K.'s Serious Fraud Office. "H-P intends to seek regress against various parties in the appropriate civil courts to recoup what we can for our shareholders," she said.

Note: A previous version of this post reported that H-P acquired Autonomy for $10 billion. Currency fluctuations and other factors raised the price to $11.1B when the deal closed in October 2011.