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November 21, 2012  Wed 8:13 AM CT

Staggering, but this is what you have come to expect from Hewlett-Packard.

That's how I feel about this revelation involving charges of fraudulent accounting at Autonomy. You had a company that so many people thought was overvalued being bought by a CEO who was clearly overvalued, approved by a board that had no value. I don't know a soul who thought this deal was a good one to begin with except Leo Apotheker, at least at the price it was going to pay.

Lest we forget, Oracle did want to buy them for $6 billion, $4 billion less that HPQ paid. But I could argue that Larry Ellison, shrewd acquirer that he is, would not have gone through with this transaction.

Now here's what matters: Even though the alleged fraud was at a company acquired by Hewlett-Packard, my "accounting irregularities = sell" rule dictates selling HPQ, a stock I have already been telling you to unload for months and months now.

I was impressed by the fact that the cash flow for the company is holding up despite the declining hardware and software businesses here. The personal computer business fell 14 percent, printing declined 5 percent, services dropped 6 percent, and enterprise servers saw a 9 percent decline.

But frankly, so what? You can only cut back so much before declines like that just wipe your business out. The idea that Meg Whitman is still buying back shares and paying dividends after these shocking declines and the Autonomy fiasco is a little disappointing. logoAfter all, this is hardly a debt-free company. I think she just wanted to show that its businesses truly do generate cash, so she's sticking by the projections for next year and is pounding the table on cash generation.

The simple fact is that, despite this company's amazing pedigree and its 60-year experience, it is a totally broken enterprise going the way of BUNCH (Burroughs, Univac, NCR, Control Data, and Honeywell).

NCR saved itself by becoming a force in ATMs, as well as maintaining its register business. Honeywell became a diversified maker of pretty much everything but computers. Control Data managed to cobble together some service businesses that were spun off and ultimately sold to create value and Burroughs and Univac combined to become Unisys. (The latter feels a heck of a lot like the future of Hewlett-Packard.)

That's because in the end, this company, like Dell, is just an assembler of parts with very little added. The services business, GME, bought by former Hewlett-Packard CEO Mark Hurd to diversify away from hardware, is getting crushed by Accenture, IBM, and SAP. The phone business Palm, also bought to diversify, is stillborn. And finally, the networking business, which looked so promising as a competitor to Cisco, has been crushed by that recharged colossus.

It would be enough to stay away from HPQ just because of the crushing of all of those others businesses. But the simple fact is that there were accounting irregularities here that cost them $10 billion, and even if everything were hunky-dory I would still tell you to sell. And sell. And sell.

: Cramer's charitable trust is long IBM.
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