Hewlett-Packard Settles DOJ Litigation, Subsidiary Accenture Involved

Hewlett-Packard Co., the world's largest computer maker, has agreed to settle a lawsuit in principle imposed by the U.S. Department of Justice (DOJ). The government alleged that H-P, along with Microsoft Corp. and Sun Microsystems, formed an illegal cartel to secure government contracts. As part of the settlement, H-P will pay $50 million, expected to reduce its third-quarter profit by 2 cents per share.

Key Takeaways:

• H-P has agreed to settle a lawsuit in principle with the DOJ, which accused the company of forming an illegal cartel to secure government contracts.
• The lawsuit, initiated in 2007, involves H-P, Microsoft, Sun Microsystems, and Accenture, with H-P agreeing to pay $50 million.
• The settlement is expected to lower H-P's third-quarter profit by 2 cents per share.
• H-P retains its position as market leader in the global PC market with an 18.1% market share, although it declined marginally due to lower international sales.
• The company's performance is expected to remain positive due to improved macroeconomic fundamentals, but competition from other tech giants and smaller Asian players is likely to intensify.
• Accenture, a subsidiary of H-P, was involved in the lawsuit, accused of receiving illegal consideration for government contracts.

Statistics:

• H-P is expected to lower its third-quarter profit by 2 cents per share due to the settlement.
• The company has agreed to pay $50 million as part of the settlement.
• H-P retains its position as market leader in the global PC market with an 18.1% market share.
• Global PC shipments in the second quarter of 2010 grew 22.4% year over year.

Sources:

• Zacks Equity Research, Analyst Blog Update, 2010.
• Zacks.com press release, 2007.
• IDC market research report, 2010.
• Gartner market research report, 2010.
• Zacks Investment Research, Inc. press release, 1978.