It has been reported today that HP has agreed to pay $57 million to settle a shareholder lawsuit that accuses the company’s former management of defrauding shareholders by abandoning WebOS and a business model that the company had touted for some time.
The lawsuit was filed after former Chief Executive Leo Apotheker shocked HP investors on August 18, 2011 when he announced plans to refocus the company on business services and products.
The Abandonment of WebOS
It was also announced by Apotheker that HP would be dropping the WebOS operating system that the company had acquired during the acquisition of Palm in 2010. WebOS was initially seen as a promising platform that could compete with other mobile operating systems like iOS and Android. However, the decision to abandon WebOS left many investors and customers bewildered. The operating system had a dedicated following and was praised for its multitasking capabilities and user-friendly interface. The sudden shift in strategy not only affected the company’s market position but also led to significant financial losses.
Strategic Shifts and Financial Implications
In addition to dropping WebOS, Apotheker announced that HP would pay $11.1 billion for British software company Autonomy Plc. This acquisition was intended to bolster HP’s software and services division, but it quickly became controversial. The deal was later marred by allegations of accounting improprieties at Autonomy, leading to a significant write-down and further financial strain on HP.
Moreover, Apotheker’s plan included dropping the HP personal computer sales division, a move that was met with widespread criticism. The personal computer division was one of HP’s core businesses, and its potential sale raised concerns about the company’s future direction. This series of announcements led to a sharp decline in HP’s stock price, eroding shareholder value and triggering the lawsuit.
Today Sarah Pompei, an HP spokeswoman explained: “HP has reached a mutually acceptable resolution through a mediated settlement,”. This settlement aims to resolve the grievances of shareholders who felt misled by the company’s abrupt strategic changes. The $57 million settlement is intended to compensate for the financial losses incurred by shareholders due to the drastic shift in business strategy.
The settlement also underscores the importance of transparent communication between a company’s management and its shareholders. Investors rely on consistent and reliable information to make informed decisions, and sudden changes in strategy can lead to significant financial repercussions.
For more information on the new agreed settlement by HP jump over to the Reuters website for details.
Source: Verge
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