Fitch: Hewlett Packard's Ratings Unaffected by Autonomy Charge; Outlook Remains Stable

NEW DELHI, India & SYDNEY, Australia & SINGAPORE--()--Fitch Ratings stated today that the ratings and Outlook for Hewlett-Packard Company (HP) and its wholly-owned subsidiaries, Electronic Data Systems LLC (EDS) and Hewlett-Packard International Bank PLC (HPIB), are unaffected by HP's $8.8 billion non-cash impairment charge associated with its prior acquisition of Autonomy Company plc (Autonomy).

Fitch's stance is supported by:

--The non-cash goodwill and intangible asset impairment charge, albeit somewhat larger than expected, was already reflected in HP's ratings. Fitch anticipated a significant impairment charge based on HP's numerous comments about the underperformance of Autonomy relative to expectations and extent of work necessary to improve performance within the context of an excessive purchase price.

--The significant impairment charges associated with prior acquisitions, including EDS, Palm, Inc. and Autonomy, reflect the historical instability of HP's senior management and Board of Directors (BoD). Fitch believes the Autonomy acquisition was significantly overpriced notwithstanding the alleged accounting improprieties, disclosure failures and misrepresentations. However, the current BoD should be partially reprieved if the allegations are ultimately proved to be true.

Fitch believes CEO Meg Whitman provides management stability, enabling the execution of a consistent, long-term strategy. Near-term acquisition risk is mitigated by Whitman's commitment to limit acquisition activity to repair the balance sheet in an effort to restore HP's credit rating to 'A'.

Nearly half of HP's BoD was relatively new when the Autonomy acquisition was announced having been appointed only nine months prior. Importantly, Ralph Whitworth of Relational Investors joined HP's BoD in November 2011, subsequent to the Autonomy acquisition. Fitch believes Mr. Whitworth, through his participation on the board and member of the Finance and Investment Committee, provides greater financial disciple, thereby reducing the risk of future overvalued acquisitions.

--HP's revenue, EBITDA and free cash flow for the fourth quarter and full year fiscal 2012 were in-line with Fitch's expectations and the company affirmed its outlook for fiscal 2013. This supports Fitch's expectation that at least half of the $5.5 billion of debt maturing in calendar 2013 will be repaid. Financial results in fiscal 2013 will benefit from numerous new product introductions and cost reduction actions offset by a weak global economy and aggressive competition.

For additional information related to HP rating strengths, concerns and drivers, please see Fitch's press release dated Oct. 5, 2012.

Fitch continues to rate HP and its subsidiaries as follows:

HP

--Long-term Issuer Default Rating (IDR) 'A-';

--Short-term IDR 'F2';

--Senior credit facilities 'A-';

--Senior unsecured debt 'A-';

--Commercial paper (CP) 'F2'.

Hewlett-Packard International Bank PLC

--Short-term IDR 'F2';

--CP 'F2'.

EDS

--Long-term IDR 'A-';

--Senior unsecured debt 'A-'.

Additional information is available 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 8, 2011).

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

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Fitch Ratings
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