HP agrees to pay $57 million to settle shareholder lawsuit
(Reuters) - Hewlett-Packard Co agreed to pay $57 million to settle a lawsuit that accused the personal computer maker's former management of defrauding shareholders by abandoning a business model it had long touted.
Context & Ripple Effects
The $57 million payout extends what is by now a familiar pattern for Hewlett-Packard: an $14.5 million settlement in 2006, a $55 million payment in a 2010 kickbacks case, and now another eight-figure check — this one tied to claims that former management talked up a business model it had already decided to abandon.
The timing matters because HP is simultaneously negotiating a separate, larger exposure: as of February 2014 it was reported to be exploring a settlement of the shareholder lawsuit over its botched 2011 Autonomy acquisition. Tech outlets including The Verge, VentureBeat, SlashGear, DailyTech and the Inquirer all picked the story up within a day, reflecting how much attention any new legal liability carries while the Autonomy case hangs over the company.
First-order effects
- Shareholders in the class action recover $57 million without a trial, while HP closes out one front in a multi-year run of litigation against its former management.
- Current HP leadership gets a clean resolution of a case centered on decisions made before their tenure, but the separate Autonomy shareholder suit remains an open, potentially larger exposure.
Second-order effects
- A paying defendant strengthens the bargaining position of plaintiffs in the still-pending Autonomy case, which HP was already reportedly trying to settle as of February 2014.
- Each successive settlement raises the cost of HP's directors-and-officers liability coverage and adds pressure on the board to tighten how strategy shifts are disclosed to investors.
Third-order effects
- If the pattern holds — settlements in 2006, 2010 and now 2014 — litigation risk becomes a structural line item for large-cap tech companies undergoing strategy reversals, shaping how boards vet and communicate pivots away from long-touted business models.
The trend: Recurring eight-figure shareholder settlements are turning strategic reversals at large-cap tech firms into a priced-in litigation cost rather than a one-off embarrassment.