Transcripts For CNBC Squawk On The Street 20121120

Billion due to serious improprieties and misrepresentations and disclosure failures that occurred prior to its purchase by Hewlett Packard. In other words, its fraud. After autonomys founder and ceo Michael Lynch was fired by meg whitman, sources close to the company tell me a Senior Executive from autonomy came forward with evidence of widespread accounting misrepresentations that occurred before it was bought by hp. Hp began an investigation and concluded that these accounting improprieties inflated the value by 5. 3 billion. The ceo then relied on audited financials when making a bid to buy the company. Those financials were audited but there were plenty of investors out there who questioned autonomys growth rate. Sources close to the company allege that autonomy pursued a number of avenues to make margins, growth rate and overall value appear far higher than it actually was. The company was selling computer hardware. Desk top computers, its a Software Company at a loss to supplement revenues and then taking the cost of that as a marketing cost so Gross Margins would not be impacted. They will sell it directly. You want to sell it to original equipment manufacturers giving it the appearance that they had strong growth. Finally, sources close to the company tell me the investigation conducted for hp by Price Water House Coopers found it was getting customers to pay a high up front licensing fee in return for showing them large fees over time for hosting services. Again, making license fees look much better than they otherwise had been. All of this to make margins look better. They were as high as 45 . They really were closer to 28 sources tell me. Hp has now created a baseline pro profitability at the unit aware that the organic growth rate paying over 11 billion at cash was nowhere near what it appeared. Hp referred the matter to the s. E. C. That having taken place im told only recently. Perhaps as recently as the last week or so. Guys . Wow. Just a shocking story. As shell games go, how sophisticated was this shell game . Is this something you could expect your every day auditor to find . Thats a really good question. I always go back to that famous Conference Call saying fraud by its nature is hard to detect. People were asking the same question. How could you not have known. By the way, back then to take you back quite a ways, you see there were revenue recognition issues. Thats what were talking about here largely. But that being said, there were a number of short sellers who looked through the numbers and had a lot of questions when autonomy was a Public Company. Having testified on behalf of the government in the prosecution of the cfo, thats where Bogus Companies there were Bogus Companies involved. This is a real company. Im listening to all of the things you said and i could see, wait a second, Hewlett Packard, well, sun microbought by oracle gave away the hardware to sell the software. They lowered Gross Margins by doing it. If you want to get a big up front price for a piece of software and then do back end and lower as long as you divide it by 12, thats real too. Im hearing that its entirely possible that that Business Model that they did is not fraudulent but that the numbers involved were fraudulent. People do this. They do it legitimately. Margins are killed by sun micro. They dont give money to resellers to buy a product. Thats a kickback. Thats a lazy susan kickback. Im so old. Ive seen lazy susan deals where you give it to me, i give it to you, you give it back to me and i give it to you for revenue. Government doesnt like lazy susan transaction. Im a shareholder of Hewlett Packard. Someone out there is a shareholder looking at a stock at tenyear lows at this point. You want to find out whos responsible for whose eyes were the wool pulled over. Many wondered where they paid so much money for this company. Unstructured data company. Hewlett believe the Companys Technology is very strong. Really . Not near worth what they paid for it. Many people wondered what is he taking a shot for autonomy . Hewlett packard suffered the minute they did that deal. And he followed it up by saying well split the company in two remember. Maybe that would have been part of autonomy you would have taken over is hardware. This is an extraordinary story, people. Extraordinary. Major American Company thats really just in our just disintegrating. They did cash flow. What line in that release was positive . Printer volumes down 22 . Do you think thats positive . Netbooks down. Then you hear about this accounting except cash flow generation. Thats what you point to. People worry about hp. They reduced their amount of death. Gave back money to dividends. They generated over 10 billion in cash. How long can you do that when you have that decline . When you see jcpenney or radio shack or best buy they generated more cash this quarter than they did a year ago. Eventually theyll have no business and the cash flow will be huge. It adds to the long series of embarrassments. The ap takes a crack at this. They mention eds. Another big writeoff from the previous quarter. They say hd blamed the results not panning out as expected. The number of small bad decisions that have led to Something Like this only this company could have this happen to them. This company suffered so many different lows whether it be the exit from the company. Listen. This is a great American Company. Autonomy is a tiny percentage of the overall revenues. 300,000 people worked there. Since the day they announced autonomy acquisition, its down 70 . It could be pointed toward the reason behind the stock decline. People knew and wondered about their strategy when he did that deal. What are you becoming as hp. Meg whitman has taken the company in a different direction. Shes been at the helm for over a year. They says this will be a longterm turnaround. Those that believe in it will be akin to what happened at ibm which took many years to accomplish. Well talk to meg an hour and a half from now. Her bonds are the companys bonds trading up since she came in. Bonds were getting hit. People worried about the Credit Rating. These bonds have been resurrected. Thats important. Im trying to put a positive put lipstick on this. What i find interesting about this story is you remember mike lynch, the man who ran this company and founded it was at hp running and men meg fired them after they had significant underperformance. The reason is they had to change the way they were going about accounting everything. Why stick around if he knowledge that any fraud was going on . Why would he and so many other execs stay on . Thats a good question. We dont know the answer. Weve seen mr. Lynch listening in on the Conference Call that hp is having and perhaps well be able to get to him. Do you think he would come on the show . He might. Defend himself. He expects to comment on it later on today. Meg whitman there will be pushback against hps contentions. They dont use the word fraud. I use the word fraud. Its a sharply worded statement from them that says we were completely taken advantage of and you guys made stuff up. Put it in context. You have covered the great frauds. This is a huge one. Its a big number. Maybe not enron or worldcom but maybe nortel. Maybe sunbeam. Chainsaw with no. Youre talking about the warehouse full of grills that didnt exist. Did they exist . Came to my office with sunglasses on. Never trust a man with sunglasses on indoors. Never took his sunglasses off . I never trust someone like that. Bono is out in that case. At least there he has rose colored glasses. I dont know if he had a light problem. We dont know. When you get to fraud, you got to just sit back and say is there anything at the company . There obviously are things at the company here. The stock is telling us that those things are worth little. The stock is incredible. As jim says, the shares are in fact weighing on the dow futures this morning a day after the 207point rally sparked by hopes that the president and lawmakers will reach an agreement on the fiscal cliff. Both the dow and s p posting their biggest gains in two months. Nasdaq recording the best day since july 27th. Talk about volatility, weve had seven triple digit moves on the dow this month. I think for the month of october we had five. Three in september. Two in august. Things are getting more and more volatili voluatile into the end of the year. Yesterday there was hope the president has something going fiscal cliff wise. You get that thing going it transcends a lot. Lowes was good. Home depot. Did you see housing numbers today . Something good is happening in the country. We got something good going in housing. Good in autos. These are very strong numbers despite sandy you get a good read away from congress was out on friday and president was begun on friday and we didnt have massive rally we saw yesterday. We had option expiration. I think the idea that hes talking to people who have been the idea that the white house is talking to Business People and lets say youre boeing. You got a lot of Congress People that you could call and say, listen, this is real bad for us. Were the ones getting hurt. Do you remember your roots, republicans . Youre prodefense. Want to raise the Defense Budget. By doing this youll cut our Defense Budget. The democrats did flip on a lot of things that republicans have got to be worried about. This is not just the Defense Budget has always been championed by the republicans. When you see boeing get the call, honeywell is laying off people already in defense. You got real issues here for employment not just increases for people and taxes. Employment. Cant have that go down. People may not believe that it was the rise above rally. Whether or not you believe it was rise above it 200day moving average on s p 500. We did reach that key technical level in yesterdays rally. Whether or not you think its because of kumbaya feelings between both sides on the fiscal cliff or not, technically speaking were in a better place than we were yesterday. Well have to see this reaffirmed by another couple closes. How about apple . Apple massive rally. Massive rally. There must have been people at 505 pressing in on the short side. Think people at apple are laughing . I feel like i should take the pc and throw it out. What do i got, hewlett . And then you have a dell. Punch line, yeah. Hewlett packard. Lets talk about best buy. Were talking those shares fall in premarket trade excludeing items the Electronics Retail chain reporting well below street estimates which stood at 12 cents a share. Revenue above forecast for same store sales falling 4. 3 in the quarter. Best buy ceo calling his companys q3 numbers clearly unsatisfactory and the thing in the press release that jumped out at me is revision lower and sharp revision lower considering the last guidance was in august. We thought it was 1. 25 billion. If youre an investment banker, youre looking at cash flow. That has got to be maybe you rethink this thing. This thing generates a lot of cash. If you are a pe buyer, the reason you are remotely interested is because best buy still does generate a lot of cash. Of course you need it to generate a lot because it will generate less and less or at least you have to anticipate that if you put a number in there in terms of evaluation. Lets take it from the high of what they were looking for just a couple of months ago at 1. 5 billion and lets assume now the low at 850 million. Whoa. Whoa. If you are sitting there and you are one of the three firms looking at this thing, you got to be going, okay, lets do a little rethink here. Not that youre necessarily not in there. But whats the right price if you decide you want to be. Unfavorable product mixing mobile phones, televisions, impact product transitions. This back thursday, wednesday, tuesday, monday, whatever they made it because it seems to happen every single day, when i was out yesterday it was like black monday at nordstroms. The whole day i didnt shop once. This is the season of the 60 incher and in the end theyre going to give you a 60 inch to buy one get one. I mean lets hope for poor people sitting at best buy right now those people are paid actors. How much does it cost. Give me five people in a tent. I never thought of that. Were talking about it now. Of course theyre paid actors. Hired by best buy is that what youre alleging . Would you do that . That would be a mischaracterization. Im just saying if i were running a retailer that sold 60inch tvs, i would that would be a misrepresentation is what that would be. I would get tents. Go to Eastern Mountain sports. They have recreational equipment. You rent them. If they arent doing it, they should be. You can get those occupy wall street people. Just line them up. We have ten people everywhere. Wow. 60 inchers. When we come back, as david mentioned in the next hour a live interview with hp Ceo Meg Whitman. The accounting bombshell the latest challenge she faces in her efforts to turn that company around. 10 40 a. M. Eastern time. One more look at futures. Took a hit on the hp news. Well see what the effects are when the trading day begins in just about 15 minutes. [ female announcer ] the power to become a better investor has gone mobile. With features like scanning a barcode to get detailed stock quotes to voice recognition. Etrade leads the way in wherever, whenever investing. Download the ultimate in mobile investing apps, free, at etrade. Lets look at futures. Hewlett packard waying iweighi dow jones average. Down two points. Straight ahead, a first on cnbc interview with Hewlett Packard Ceo Meg Whitman which you wont want to miss. Much more squawk on the street live from post 9 straight ahead. [ female announcer ] today, its not just about who lives in the white house, its about who lives in the yellow house, the green, and the apartment house, too. Today we not only honor the oval office, but we honor the cubicle, and the home office as well. Because today its about all of us. And no matter who you are, youre the commanderinchief of your own life. About eight minutes to the bell on this tuesday morning. Lets get jims mad dash. Okay. Heres the thing. This is a heavily shorted stock. Obviously the time to short it was right here. They appointed transition end of the year and executive mr. Brian kelly. Frees cocacola. Suddenly you have a company that people are saying some people would argue is sketchy to use my 21yearold daughters word. You bring in a guy from cocacola. Best run Beverage Company in the world. I think the shorts are before twitter he was just herb greenburg. Hell have words to say. This cut a lot of people short. I warn people the time to go short was a long time ago. The range has been up, not down. Kelly has been talked about as a potential successor. I thought he was the up and coming guy at cocacola. No matter what you think about it, anyone from cocacola is better than anyone at Green Mountain. Well put. Now, also intel speaking of the successions. Ubs downgrades intel. Look at this. You got a stock thats a very high yield. Every single commentary. There wasnt a single positive word about it other than he beat amd and always mentioned that hes lost out on the mobile wars. I struggle for a reason to own intel. They are so smart. Theres got to be a reason in there but in the meantime i look at Hewlett Packards pc numbers. Andy bryant telling the journal no reason to change strategy. Go by arm holdings already. When we come back, pc blues and now an accounting scandal. Can meg whitman reinvent hp. Shes coming up at 10 40 a. M. Eastern. One, olaf gets great rewards for his Small Business pizza [ garth ] olafs Small Business earns 2 cash back on every purchase, every day helium delivery. Put it on my spark card [ pop ] [ garth ] why settle for less . Great businesses deserve great rewards awesome [ male announcer ] the spark Business Card from capital one. Choose unlimited rewards with 2 cash back or double miles on every purchase, every day whats in your wallet . Throughout our lives. One a day mens 50 is a complete multivitamin designed for mens Health Concerns as we age. It has more of 7 antioxidants to support cell health. One a day mens 50 . [ male announcer ] this is steve. He loves risk. But whether hes climbing everest, scuba diving the Great Barrier reef with sharks, or jumping into the market, he goes with people he trusts, which is why he trades with a company that doesnt nickel and dime him with hidden fees. So he can worry about other things, like what the market is doing and being ready, no matter what happens, which isnt rocket science. Its just common sense, from td ameritrade. Weve got what could be a very big day here on the markets. Will we or will we not confirm this big move that weve seen over the past two days . We did have Housing Starts fouryear highs for the month of october. Ben bernanke speaking to the Economic Club of new york at 12 00 noon today. Thats something to watch on the markets. We mentioned this 200day moving average in the s p 500 and the huge move we saw in apple which helped the nasdaq as well. I see a lot of housing stocks inching up. That theme continues. Apple, one of the things i liked about apple is that was a classic island reversal. Went down a lot. I dont like up openings. Apple had one yesterday. Has one today. You could argue that if you go over line by line whats happening at Hewlett Packard, apple is taking giant share. We all want Razzle Dazzle from apple. We dont want three yards and a cloud of dust. Its four yards and a cloud of dust and first down on the third down. Unless youre the Philadelphia Eagles in which case its three and out. You shouldnt do that to him. I root for the 49ers. How about my father on sunday saying why cant you just be a fan of the giants . Why cant you . Its an interesting moment. The journal today weighing in saying all you jets fans at least youre not the eagles. Hi to retweet your tweet. Im the tin man. Thank heavens theres nothing there. Rimm gets an upgrade. Jeffries goes to a hold. They did a survey of major carriers that the blackberry 10 is being received better than they thought. They are puzzled. They say why would someone like a phone thats two years later. Theory is that carriers see it as the last chance to avoid an operating system duopoly. One more player in the game. The question is whether they will be able to. When you ask those that run verizon or at t whether its going to be a survivor, they are very coy on that. Certainly anticipating an android world doesnt benefit them. The phone makers also or larger issue makes you think about verizon and at t themselves which they dont like to hear. But they are. Rimm stock has been a winner lately. You have to admit that. Its been good. You like to point out that last time this particular analyst upgraded the stock, that foreshadoweded a 40 move in the stock. We have peter on later on in the show. His target is only ten bucks. Doubles from five. All right. Here we go. Opening bell is ringing on wall street. Here at the big board, executives of an Israeli Company here for a conference and city meals on wheels providing 2 million meals a year for elderly and homebound new yorkers. A great cause there. All right. Here we go at the open. A lot of red here. Hewlett packards Conference Call is going on right now. They are talking about things like i think it just ended. Theyll have a number of calls including a media call and a u. K. Media call, i believe. That will be interesting given where autonomy was based and then well speak exclusively to meg whitman. That all happens before 10 40 . That will happen between now and 10 40. It does seem like a moving target when you go over it line by line. This quarter will be better than next quarter. Thats not good. No. I struggle. I struggle on that cash flow. You cant have your business go down, down, down and be able to cut costs to the point where you can make money eventually. You cant. Its a 22. 7 billion market value. They generate 4. 1 billion in cash this quarter. Do you think oracle should buy them . Im serious. Ill tell you something i will not be facetious. Can we do a private equity deal . Is it possible . They have a decent amount of debt. A lot of it im being facetious. Free cash flow generation is what theyll be focused on. Right. Its only twice what they generated in the last year. You can hear them saying that someone at oracle has a big consulting business. I brought it in. They merged it. We spin out hardware. We throw in hardware with it. You have a company that could be worth something. They could fire a couple hundred thousand. Dont want people to be fired. Dont get me wrong. Dont want to be thats a lot of people to fire. Its going to be rumored. Youre doing both stories. Its the value story and value trust. I dont think you should recommend a stock on basis of takeover if fundamentals are faltering and fundamentals away from cash flow are faltering and when you get these declines, she has to stay one step ahead of the posse at all times. You also said that accounting troubles scare you more than anything else. Does a this count in this case. Not accounting troubles this is not worldcom. There was a merger. Remember walter forbes. He wasnt your friend, was he . No. Is it enough to say that previous management bought it and bought the accounting issues or as a shareholder you say at the end of the day the board approved the deal and board took in those reports and said okay, well go for it. The board here is probably it has been known as the worst board of every major American Company. The board has changed a lot. Yes. Its the same board largely now it was that approved this deal except one was not on the board, ralph. How is the board its important for a board to know about accounting improprietaries. It is hard to discover fraud. Chris christie asked me to testify on behalf of the people of the United States. The company told me the day before the fraud this is the strongest weve ever been. I dont know. You want to blame the board, you blame them for hiring that guy. That was a disaster. True. Made 25 million for about 11 months work. Not bad for him. Helped to completely ruin the company. It was a great company. These were titans. Its not over yet. Weve living so long with Hewlett Packard being a bad company its not over yet. What are you second act american . Are you going with some sort of im going to rise above. Great. Fine. Its amazing how the news has really overshadowed other big stories. On another day we would lead with jpmorgans new cfo. We knew potentially doug was going to step down after dealing with a lot of fallout from the london deal. That was not related to. I think he was ready to try something different. They elevated so weve got her and of course Morgan Stanley so two of the most senior women in the Financial Services industry, both cfos. I thought this was he took this thing, jamie dimon, and he did in his own way just say, listen, if you were involved in this thing, if you touched this thing, its going to be difficult. Thats how i look at it. I look at it 30,000 feet saying he had a major error and did what you want him to do which is say everybody who touched this, youre not welcome. I feel thats what he did. I think thats what he did. At the end of the day that does appear with whats more or less whats happened even though who were related. Cfo at the same time didnt report directly. Textbook. I was critical of the way it happened. Textbook in the way of getting behind it and deciding anyone who had a handle on it im sure someone says why didnt he quit himself . I dont believe that he knew this. I dont think i think you can again do a lot of things and you get the documents and the run and the run is not true but you believe the run because youve always believed the run. I want to point out a big move that we have in groupon. Its up by almost 13 after tiger global announced 9. 9 stake in the company. This came out last night. Its a passive stake, not an active stake. Still tiger has been involved in investing early on, early stage invest areas in a lot of these names linked in. Facebook and now groupon. Clearly not too early. It was not too early. If you love groupon, you havent really missed that much of a buottom. People will say i have to get in there. I dont know. You need anything is possible. Reverting to your analysis of Hewlett Packard, maybe groupon, the beginning of the big turn. The day is here. Bring it on. Or maybe not. Its down to a level where if they can figure it out, amazon i remember for years amazon was regarding never mind. I was going to put amazon in the same sentence as groupon. Dont do that. Lets get to bob pisani. He can save us on the floor with whats moving. Good morning, bob. The important thing here today is im getting excited about housing. Its been building for a while. We all say theres a housing recovery. Everyone is holding their breath waiting for some very clear trends to start emerging. Home Building Companies moved ahead of this. Overall industry has been very mute on this. Now were getting the numbers. Theyre coming in. This is a real housing recovery. Home builders this morning were up about 2 as i was coming down the stairs. Housing starts numbers best since october 2000 and 894,000. Were starting to approach the important psychologically important 1 million start levels. Thats where you will see a lot of Building Materials companies, the guys who make sheet rock and drywall, thats where they will ramp up production levels because a number of them said we want to see clear evidence that Housing Starts are in an upward trend. You get near 1 million, theyll start increasing Factory Production because a lot of stuff like sheet rock, they held back production because numbers have not been titanic recently. Now the trend is really happening. Look at whats going on here. Starts yeartodate up 28 . Permits, year over year, up 30 . Those are real signs of improvement here. I think well talk more about that in the next hour or so. Im getting excited and encouraged. Not encouraged about best buy. Best buy is a 12 stock. T this was a 20 stock back in august. You guys talked about this. Precash flow revised lower. Buybacks suspended. Disaster margins declining. Look at same store sales numbers. The heart of the company, consumer electronic, down 8. 4 . Services, down 4. 6 . The only thing that increased, the only thing that increased was appliances. Mobile phone sales on the flat side. Apple and amazon cut into their sales. Other promotions by discount clubs are taking market share away from them. Maybe theres a chance that someone could come in and buy it. I guess people are still talking about it. My bet would be they will sit around and wait for prices to drift lower before anybody actually comes in at this point. Finally a comment on a story that was yesterday that i think was not reported enough. Honeywell came out and said forget about sequestration. The cuts are coming in defense whether we have sequestration or not. Honeywell said they thought 80 of sequestration cuts would come regardless and that people should get used to that fact that there will be less spending in defense. 80 . Bottom line here is, folks, get used to whats going on in defense. Also, regardless of the fiscal cliff theres cuts. The u. S. Government is the worlds biggest buyer of software associated with the running of any kind of government. Thats another kind of corollary here. A big comment from a lot of people in the Defense Industry about that yesterday. I think theyre the First Company to come out and make realistic expectations of what will happen in the next couple of years. Back to you. Okay. Thank you. Dave cote is the head of the curve on all of this. Lets shift to bonds and dollar. Rick santelli at the cme group in chicago. Rick . Thank you, jim. Everyone is excited about good housing numbers. Everybody but the fixed income market. Everybody but the equity market. I know theres an hp issue here. However, lets look at the charts. Lets put up a twoday chart of tens. Clearly you can see were up about a basis point on the day. If you look on the right side of the chart and look around 8 30 eastern, you cant pick out that we had a good housing number. If you really switch this around a bit, you look at the shorter matures, you could almost argue that theres a fed implication here small at best. Something else happened yesterday. France lost aaa rating. When we lost our aaa rating, everything rallied. It isnt necessarily true with france. Now, lets start with the currency. If you look at a twoday chart of the euro, you can see theres very Little Movement there on a twoday which gives you a nice glimpse that it was virtually unaffected. Lets look at their own backyard. Look at a twoday chart of two year trades. They are up. Lets look at their ten year. I think this is an important dynamic to Pay Attention to. Its about relative ratings. What investors say is really what matters. Theyre obviously squawking a bit more about the french downgrade than they did about the u. S. Downgrade. They have france at this level and u. S. Already lost aaa just seems logical at best and one final note, if we continue to monitor the treasury market, lets not forget that we do have a tips auction tomorrow. 13 billion. Back to you. Thank you so much. Now, Energy Prices pulling back after mondays gains maybe some peace talks in the air. Lets go to Sharon Epperson at the nimax. A bit of a pullback but keep in mind we saw Oil Prices Settle at onemonth high yesterday and we are looking at a slight retreat after nearly 3 gain across the complex. The Energy Complex in yesterdays session. Were still watching what is happening in israel and gaza. The conflict there and uncertainty remains. Focal point of many traders. The reason why perhaps were not pulling back even further although many are anticipating we are going to see an increase in u. S. Crude oil supplies when the Energy Department reports its numbers tomorrow. Well monitor israels situation because thats likely to have a very important effect on the oil price in this session. Gold continues to trade in a range here. Ubs saying there needs to be a significant breakout in this range for oil to have true momentum and on this short holiday week, it appears that many traders are just trying to cover their short positions and not really taking out new bets a at the moment but there are some taking out significant bets and there have been reports that george and john have added to their gold holdings. We have reported that gold etf holdings are at record levels. There are many that want to be in this complex but of course still right now we are looking at a slight pullback in the gold price right around 1730 an ounce. Sharon epperson thanks for that. Hewlett packard didnt have it. Regulators didnt have it. One famous investor did. Find out who were talking about. That is next. Plus, Hewlett Packard shares now sharing at decade lows. We have an interview with Ceo Meg Whitman and well ask her about the outright misrepresentations at autonomy which is pulling stock down as we head to break look at this mornings early movers. A lot of Home Builders on Housing Starts numbers. They are trading higher in todays session. Having you ship my gifts couldnt be easier. Well, having a ton of locations doesnt hurt. And my daughter loves the santa. Oh, ah sir. That is a customer. Lets not tell mom. [ male announcer ] break from the holiday stress. Fedex office. Part of a whole new line of tablets from dell. Its changing the conversation. Dow is off 50 points. Hewlett packard, biggest weight on the dow right now down by about 12. 5 . These are lows that we have not seen since october of 2002. Tenyear lows on Hewlett Packard. Bright spots on the dow at this hour. Home depot for one trading higher by 25 cents a share. Carl . The slump in hp shares has one prominent investor saying i told you so. Herb greenburg is back at hq with details on that. A victory lap for those shorts. While chatters of fraud at autonomy may have been a surprise to Hewlett Packard, it wasnt to short sellers. One said this morning that in early 2011, autonomy was his firms largest european short and autonomy is what led him to short Hewlett Packard. The reason we got interested in Hewlett Packard because of one of our biggest positions was autonomy. Hewlett packard bought the company for 11 billion. The accounting was dreadful. A disaster. They did almost no Due Diligence on the deal. It close quickly. Oracle was shown the deal and passed. Within seven months the ceo and a number of its top people all left. It is the presence of his Autonomy Research which is worth noting here. A report by his firm in july 2009 ticks off more than a dozen concerns, many of them focusing on accounting such as claims about the size of its ediscovery business are questionable. Autonomys claims of 20 growth in revenue are inconsistent with competitors reported figures. Level of Financial Disclosure is very poor. It has created a significant cookie jar of earnings. He even questioned whether the chief operating officer, a former junior mergers attorney was qualified for the role. What this really gets down to is the old issue. Why is it the shorts see it first on many occasions and so many others including the company do not . I asked this question over and over year after year and no one seems to have a great answer. You know, herb, by the way, that was the greatest marketing pitch i think i have ever seen just there. Not that it wasnt well deserved. He did not call me on this. I recalled this and got ahold of him. You have worked your share of frauds. Thats for sure. Tell me what your sense is here in terms of signing off on these financials and are they or should they be a focus here . Why have auditors been sort of turning a blind eye in many of these deals especially when you had had a prominent short seller raising red flags. Im going back and just thinking that a good question is whether there is authority over auditing the auditors in the u. K. This is a u. K. Firm. There are issues around the world with that auditing issue including china. Herb, did he say anything about what hes doing with hewlett short right now . No. We were just going back and forth and in email. Hes out of the country. That would be key here. It would be key. It would be key but hes not easy to get ahold of here. I understand. Its hard to get in touch with him sometimes. All right. Thank you. Sure. Always good to tease jim and tell him hes buying drinks today on days like today where you wonder if hes covering or not. In 2 1 2 hours from now, ben bernanke set to give his first major speech on the economy since the election. Economic club in new york at 12 15 eastern time. Coming up, the message you might expect from the fed chairman. First coming up, during this week of giving thanks, were thankful for jim cramer and his six stocks in 60 seconds. Find out why when squawk on the street returns. Le announcer ] at scottrade, we believe the more you know, the better you trade. So we have ongoing webinars and interactive learning, plus, inbranch seminars at over 500 locations, where our dedicated support teams help you know more so your money can do more. [ rodger ] at scottrade, seven dollar trades are just the start. Our teams have the information you want when you need it. Its another reason more investors are saying. [ all ] im with scottrade. Six in 60. I dont know how well get it down to just six given corporate news. During this period where companies came public, almost all were bad. The Luggage Company is doing well. Nice upgrade of whole foods today. Goldman goes positive on it. The stock has been marking time since last quarter. This is a huge seasonal period. Wells likes coach. Everyone wonders when coach will come back to life. I think this upgrade may signal that china is good for them and domestic is good for them. Expedia barclays upgrade. Its integral to the travel business. Nice performer. Icahn buying more chesapeake. He values his commentary but the stock has been a dog. And tonight youre going to have sales force. Com. Maybe the most controversial company. A big cloud company. Sells at high mobile. Lets see if he delivers tonight. Nicely timed. He might have some thoughts on hp. Yes. I think he will. I think he will try to do it. Youre going to get it. What i do hes made a lot of acquisitions. How do you gain on an acquisition . Autonomy, a lot of people said it was no good and yet where was the company . What happened . I dont know. Im dazzled by what happened this morning. A big news day. Huge news day. We havent really talked about what the fed chairman may say later today or the rally yesterday and whether it changed your pessimistic tone. I just think that i need to see movement. I saw pelosi negative and patty murray negative and Mitch Mcconnell not budging. I would like to see one republican and one democrat who have been against compromise coming out today and saying were compromising and then youve got momentum and youll get a deal done. I have not seen that yet. Feel better that were above key Technical Levels . I think yesterdays rally apple really does help. Yesterdays rally was a recognition that housing is still good and autos remain good. Europe is not good. We could have spoke about the french downgrade. We need to see momentum on fiscal cliff talks or we wont have the day that we had. Have great thanksgiving. Whole foods thanksgiving at my house this year. Enough already with the cooking. Enough. Im doing the heating. Enjoy, man. Thank you. Well see you next week. When we come back, the challenges of turning around hp have become more complicated. Well talk about them with meg meg and david faber has that interview and best buy has spoken on earnings. Its a miss. Whats next for the struggling retailer and can the holidays come to the rescue. Were back in a minute. Or that printing in color had to cost a fortune. Nobody said an allinone had to be bulky. Or that you had to print from your desk. At least, nobody said it to us. Introducing the business smart inkjet allinone series from brother. Easy to use. Its the ultimate combination of speed, small size, and lowcost printing. Then dont get nickle and dimed by high cost investments and annoying account fees. At etrade, our free easytouse online tools and experienced Retirement Specialists can help you build a personalized plan. And with our no annual fee iras and a wide range of low cost investments, you can execute the plan you want at a low cost. So meet with us, or go to etrade. Com for a great Retirement Plan with low cost investments. Lets get back to big news of the morning. Involves Hewlett Packard. The company did report earnings and not being particularly well received on the numbers themselves particularly the outlook but of course it is charges of accounting issues prior to when hp bought the unit has brought the attention of investors. Hewlett packard has taken a 5. 3 billion writedown on its autonomy unit. It paid 11. 1 billion in cash for the company. That deal closed in october 2011. Done under previous management. There is the overall charge of 8. 8 billion. You havent really explained theres an additional 3. 5 billion charge related to good will impairment trading above the implied price of the socalled good will. That charge was in addition to the 5. 3 billion. They have taken 8. 8 billion writedown. Not one of the worst deals of all time but it is certainly up there in terms of the disappearance of value in a very short amount of time. You see talking about disappearance of value. Another 13. 5 decline this morning for Hewlett Packard. Sources close to the company may have confirmed many things we first reported this morning namely that an investigation began in lay may after former management of autonomy was tossed out by hp Ceo Meg Whitman. And what is alleged . They commence an investigation when the high ranking employee at ougautonomy after the leaderp said we were doing things you should take a look at. What were those things . We had customers paying high up front licensing fees in return for giving them low fees over time. We paid resellers. We gave them money to pay us back to pay us to buy our software and to make it look like we had a lot of demand from original equipment manufacturers. We did not. We were selling Desk Top Computers and other hardware at a loss but actually taking the cost of sales as a marketing cost so it wouldnt impact Gross Margins. Any number of Different Things come under this broad headline. I have called it fraud for my reporting this morning. The matter referred to the s. E. C. And to Serious Fraud office in the u. K. Remember autonomy was a u. K. Company. As reported this morning, there were any number of short sellers out there that looked through autonomys numbers when it was a Public Company and had many questions about the way it went about accounting for revenues and recognizing revenues. That did not stop former management from paying that enormous sum. A huge premium for the company and now of course a problem that theyll be dealing with at Hewlett Packard for quite some time to come it would seem. Courts will deal with this. Regulators will deal with this. We have yet to hear from former management at autonomy to see what they have to say about these allegations. I tell you what, one thing is for sure. This has moved the bar by which bad ceo and bad deals are judged. If this comes to be the way that hp alleges. Its not an aol time warner and not a countrywide but it was a bad deal. It wasnt just the deal itself but it immediately impacted hp stock price at the time it was done because people questioned the strategy which they had a right to and he was out the door not very long after. Strategy and premium to the shares. Multiple was in question at that time. The stock was down about 70 since then. Obviously there are a lot of other things going on. Secular decline in business doesnt help either. Certainly this is going to this is one thing that put that company on that track lower. You can see the stock moved down. That big drop that we saw in 2011. Do their own methodology to come up with a number they believe would have been an appropriate price to value at the time of the acquisition when you assume what real margins were and not margins they were slowing and real growth rate was not the growth rate that they were showing due to what hp claims after it was investigated serious misrepresentations. The next leg in the story is what happened with those reviews of the company and why did they miss it . Is it clear to you if the new numbers are right, would they still have written down something today . They would have taken the writedown, the goodwill 3. 5 billion writedown as they did with eds not long ago. Thats a goodwill impairment. That would still have been taken. Fascinating story. Well talk with it all day long. Hp far and away the worst performer on s p 500. The 200day moving average got crossed yesterday. What are technicals saying about this market. Mark joins us here at post 9. Welcome back. Good to have you. Thank you. You think in the near term the trend is up. I think yesterdays surge was a step in the right direction to thinking that equities are making a shortterm bottom. We surged almost 2 with decent breath. Equities back to overbought territory and that coincided with reduction in uncertainty that coincided with this entire move since mid september. As you remember, we peaked at the mention of qe3 and equities have been down 7 in the last couple months. Weve got down to levels that are important technically and now were starting to show signs of stabilizing. Were seeing big moves up in groups that lagged by technology and materials over the last few months. This is at least a shortterm positive heading into one of the seasonally most bullish months of the year. You see signs that tech might be bottoming out at this point . I do. At least on a shortterm basis we see signs and obviously apple compromising such a big percentage of the ndx and a big move yesterday and nearly 7 one of the biggest moves weve seen. Isnt that convincing in your mind . It is. It had gotten a bit overdone. We are down to levels in may lows so when you see a big move on big volume it may take backing and filling but my thinking is that we can move higher in the next several weeks in this stock and getting to 590 and over 600 before we stall out once again. You think the Broader Market retests the october highs . Theres a decent chance that happens in terms of getting up to levels in mid september. We may need backing and filling over the next week or so. In general prices are down to a level of price and time where i expect to see rallies in the next four to six weeks in december and fiscal cliff issues are moved toward next year. I do think that will be an ongoing concern for the market along with greece and whats happening in the middle east but technically at least shortterm it looks like we can rally over the next four to six weeks. Bigger issues will be next year where i think the market has potential of making a bigger peak sometime next spring but next yeartentially after that could be hairier to say the least after markets rallied for 45 months since march of 2009. Weve had a few decent years already even though this has been a tougher year to make money for a lot of people it certainly doesnt feel like market is up 10 . Do you think next year could be a down year for the 12 months . I think thats correct. There are a couple reasons to suggest that. Momentum has started to wain. If you look at all stocks and when you look at the surge this year from the june lows, momentum simply did not follow this move to new high territory. Longer term cycle suggests that as you approach the Election Year cycle and had a good years already, it would be more difficult. If you look back as markets tend to peak out and or bottoms in months like april happening over the last dozen years. My thinking is that rallies into through the end of the year and potentially next march or april will be a good time to lighten up ahead of ongoing real issues. It doesnt always work as this year proved. Fascinating stuff. Well see what happens as we get close to the end of the year. Thanks a lot. Thank you. Lets get to Brian Shactman with a quick market flash. Research in motion trading about 13 million shares. Jeffreys upgrading it from under perform to a hold raising price target from 5 to 10 saying blackberry 10 feedback is better than expected. I love this line. We believe blackberry has a 10 chance of success. The stock is up 2. 75 . Back to you. All right. Thank you, Brian Shactman. Moodies issuing a downgrade of frances Credit Rating yesterday and eu machine ministers meeting in greece. The writedown makes the rounds today and the company out with earnings. Well speak in a first on cnbc interview with the ceo of Hewlett Packard, meg whitman, moments from now. [ male announcer ] the markets keep moving. Make sure the news keeps coming with thinkorswim by td ameritrade. Use the news links breaking stories with possible breakout stocks, options with potential opportunity, futures and forex with indepth analysis. Its an allyoucaneat buffet for all things trading. Thinkorswim by td ameritrade. It doesnt just deliver news. Its making news. Trade Commission Free for 60 days, plus get up to 600 when you open an account. Israel and hamas exchanging more fire overnight. Reporter good afternoon. Its about the diplomatic activity under way right now. Indications there may be a truce on the horizon. Coming from cairo where egypts president mohammad speaking to mourners saying egypt was passing through difficult days but there could be light at the end of the tunnel and referred to the truce that may be taking place in egypt. He said that the aggression on gaza would end on tuesday. Didnt give details about that agreement. Reports coming out of israel citing officials on israel radio that a truce could be announced as late as tuesday night this evening with the arrival of u. S. Secretary of state hillary clinton. Thats whats happening outside of gaza. Here in gaza it still feels like a war footing. In the last couple of hours the iz rally israelis have warned of imminent attacks on homes and neighborhoods and forcing people to leave their cities and move into central gaza and an indication that a Ground Invasion may be imminent if a truce is not sealed within the next couple of hours. You can get a sense theres a great sense of fear among ordinary people of gaza that in coming hours it could go either one of two ways. People are hoping it will be a truce but theres no doubt with these types of leaflets and thousands of soldiers amassed on the border, it could be a ominous sign that war is on the horizon. David . Thank you very much. Lets head back to headquarters. Kate kelly has breaking news for us. We just received word that u. S. Attorney for the Southern District along with enforcement arm of s. E. C. Is announcing what they consider to be the most lucrative Insider Trading scheme ever charged resulting in benefits to a hedge fund of more than a quarter billion dollars. Thats billion with a b. The name of the hedge fund does not immediately seem to be apparent. Its a hedge fund with officers in new york and connecticut and this case centers upon a gentleman who was arrested by the fbi at his florida home this morning. He allegedly got inside information about an alzheimers drug on trial in 2006 and 2007 being conducted jointly and he passed on that information to said hedge fund resulting in the ill gotten gains and in the process committed securities fraud among other accusations. Well bring you more details as we have in this news just out this morning and theres a press conference later today at about 12 30. Well bring you details. All right. Already a busy month. Thank you for that. Well see you later on today. Big box retailer best buy reporting weaker than expected numbers just days before the unexpected start to the holiday season. For how much longer will it cut into profits . You wont want to miss what meg whitman has to say about that quarter and the autonomy write off at 10 40 eastern time. Tdd 18003452550 this morning, im going to trade in hong kong. Tdd 18003452550 after that, its on to germany. Tdd 18003452550 then tonight, im trading 9500 miles away in japan. 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Can i still ship a gift in time for christmas . Yeah, sure you can. Great. Wheres your gift . Uh. Whew. [ male announcer ] break from the holiday stress. Ship Fedex Express by december 22nd for christmas delivery. The euro slightly lower this morning as eu ministers meet to discuss a greek bailout. Ben bernanke set to talk hours from now in new york city. Andy, good to see you. Were talking euro u. S. Dollar here. Theres obviously two sides. Theres hope of a greek deal and theres hope of an aversion to the fiscal cliff. How does this tip in your view . I think theres a lot of what we call in chicago a lot of hopium out there. Hope for avoiding the fiscal cliff, hope for peace in the middle east and you can toss in hope for cure for cancer. The market has been rallying on this over the last 24 to 48 hours. To me i dont like whats going on overall and i think well see maybe just a little bit more risk on over the next maybe 24 hours. I want to take an opportunity to sell that risk at that point. All right. What levels are we talking about . Were talking about selling euro u. S. Dollar i presume and youre waiting for euro to go higher. Were just trading below my entry point. I want to sell at 128. 25. Tight stop at 128. 75. I look for a decent size move back down to 125. 75. My whole thought on this is that the debt negotiations and the cliff negotiations in the United States have not even really started. We had a handshake and constructive slap on the back by boehner and obama and thats going to fade next week when they actually get into the details of what they have to come up with. There will be acrimony and disagreement. Thats what i want to take advantage of when we see a rally and risk this week, i want to sell it and think next week we come back to reality. Basically this is more of a u. S. Dollar driven trade opposed to whats going on in europe. Yeah. Thats true. I also you can toss in there we had the downgrade of france even though s p downgraded earlier this year and moodies did it this time. Well see articles over the next tl three to four days and over the weekend with problems with the bailout facility when theres not enough aaa rated countries in there. Youll see more negative news out on that. Good to speak with you. Andy bush. For more currency trades, watch money in motion. Were off this friday but back next friday. You can get your fix online. We are awaiting a speech from fed chairman ben bernanke later today. Well have a preview and analysis of what traders are expecting to hear and what the markets want to take away from it and want you to note the banner at the bottom of our screen in terms of xstrata deal being approved by shareholders. A lot of debate about retention packages. Huge retention packages being paid. Those have not been approved by shareholders. All right. Moving on were going to have hp news. Weve had plenty of it this morning, havent we . A huge writeoff at autonomy. Hp overpaid a lot for it. And not to mention guidance for the remainder of the year or for the first half of next year. We have lots to talk with meg whitman about. That is coming up about 15 or so minutes from now. [ male announcer ] introducing the new dell xps 12. Part of a whole new line of tablets from dell. Its changing the conversation. Its changing the conversation. Well, if itmr. Margin . Margin. Dont be modest, bob. You found a better way to pack a bowling ball. That was ups. And who called ups . You did, bob. I just asked a question. It takes a long time to pack a bowling ball. The last guy pitched more ball packers. But you. You consulted ups. You found a better way. Thats logistics. Thats margin. Find out what else ups knows. Ill do that. Youre on a roll. Thats funny. I wasnt being funny, bob. I know. This is going to be one of the first economic speeches the chairman has given. You may hear a little bit about housing in the speech today. We had decent housing numbers this morning. Overall theing sector has been on the rebound. Well hear an overall sense that the economy is improving modestly but no change in policy. Why . Because general fed policy is really set for a while. The only specific question is what happens when operation twist ends just to remind you the fed sells shortterm securities and buys longterm securities to drive down longterm rates. The expectation is that when 45 billion of twist comes off, the fed will begin outright purchases. In other words, more qe on top of 40 billion of mortgages its already buying probably buy more treasuries at that end and the fed continues to debate guidance. Overall, i think the Federal Reserve is happy with whats happened with Mortgage Rates. Might have expected more of a decline if you look at the chart of the 30year Mortgage Rate what you see is that it has come down since the fed made clear it would buy mortgages back at the feds jackson hole suites. Its been relatively even because of twists and mortgages havent come through and theres the 30year fixed Mortgage Rate. I reversed that. Sorry. Its come down a bit. You can expect it might come down a bit more. Some guys said that maybe we could get a handle on mortgages. Overall the Federal Reserve thinks its been supportive of the Housing Market and that the Housing Market is key to bringing back a lasting and sustainable recovery. One other message im sure the Federal Reserve chairman will provide is to urge lawmakers to solve the fiscal cliff problem and put the finances of the nation on a sustainable path and i believe hell remind the lawmakers that the Federal Reserve no matter what it does with qe cannot undo the effects of the fiscal cliff. Steve liesman thank you for that. Got breaking news here from former autonomy Ceo Mike Lynch. Kayla tausche is back at headquarters. Of course we know the news coming out of hp this morning. Former Ceo Mike Lynch who sold the company to hp called those statements allegations and said the former Management Team of autonomy was shocked to see the Statement Today and flatly rejects these allegations which are false. Former ceo lynch called hps Due Diligence extensive. It also closes by saying it took ten years to build autonomys Industry Leading Technology and its sad to see how its been mismanaged since its acquisition by hp. Back to you. All right. The arrows have started flying in both directions. Very interesting. Dont think were going to sylvia quite yet. Well wait on that. Were going to head to break. Shares of research in motion seeing a rise in todays session after jeffreys upgraies upgrad hold. Were going to talk to the analyst behind the call in just a few. First Hewlett Packard earnings are out and who better to discuss all of the details than the Ceo Meg Whitman herself. You have a Management Team now who has a handle on the problems who knows what to do. Weve got a plan to fix this company. Well find out how that plan is coming along next on squawk on the street. 56 [ male announcer ] the mercedesbenz winter event is back, with the perfect vehicle thats just right for you, no matter which list youre on. [ santa ] ho, ho, ho, ho [ male announcer ] lease a 2013 c250 for 349 a month at your local mercedesbenz dealer. [ female announcer ] today, its not just about who lives in the white house, its about who lives in the yellow house, the green, and the apartment house, too. Today we not only honor the oval office, but we honor the cubicle, and the home office as well. Because today its about all of us. And no matter who you are, youre the commanderinchief of your own life. Finance minister meeting today to take another crack at greece. Sylvia . Reporter weve just seen ministers arriving here. Euro Group Ministers of course from the 17 euro countries and they want to hammer out the solution for getting the ne35. 5 billion euros that are needed because greece is facing the fiscal cliff as we speak. There were numerous bones of contention. We met last week to sort this out and couldnt quite get there. There was a difference of opinion lets say between the imf and euro group. They said we dont need more time for greece. The sustainability report that puts 20 as the 120 per gdp debt to gdp ratio up there. That should be the one thats reached. Euro group said we should give greece more time. Two more years were on the table. Now were discussing what exactly can be achieved for the imf and the euro group to come to the same opinion. There are a number of things that could be bargaining chips on the table. One is lowering the Interest Rate for greek debt could relieve the debt burden. The other one is of course maybe more urgently needed is Public Sector haircut. Weve seen the private sector haircut last year for greece and now of course in order to relieve the debt burden for this ailing eurozone country, we need to get debt relief from somewhere else and that could only come from the Public Sector. From the ecb. Thats something that can be hammered out tonight. All right. Thank you very much for breaking that down. Lets get to best buy this morning. Trading sharply lower after Third Quarter earnings did miss estimates. Same store sales also fell more than 4 . David straser is a retail analyst with a buy rating on best buy. Price target of 24 it says here, david. I wonder if thats still true today. The fair value is under review. Obviously these numbers were worse than we thought they were going to be. Not actually materially worse. The International Part was materially worse than we thought. U. S. Part was kind of somewhat in line with where we were. How worrisome is guidance on Free Cash Flow . Its worrisome. Some of that as they explained on the call is related to inventory and timing of inventory. Thats something we have to watch a lot closer. Our buy rating has been predicated on the fact they have cash flow which they still have. 800 to a billion dollars is significant. Thats before you see a massive Cost Cutting Program begin when the new cfo starts next month and into 2013. And probably this was a tough quarter with there was no iphone. That got delayed. People were waiting on windows 8. They definitely had some headwinds on this quarter that should reverse themselves to some degree into next quarter. You wrote last week that in the short time there has been a sense of urgency and plans are aggressive and realistic and not awade to look inward and understand mistakes they made in the past and offer solutions. Is todays report a reflection of that thesis . Part of this is them really taking a hatchet to some of the Current Operations there and i think when new ceos come in, they clear the deck more aggressively than you would elsewhere and thats part of what were seeing here today as well. This company is also fighting these takeover rumors and this quasihostile bid. Its had an impact for employees across the company. How do you think the story with schultz ends . How does that story end . Probably a deal if it gets done gets done well below that 24 to 26 range, maybe a 20 range. I think that either way the Management Team that you see in place today could end up very wellbeing that Management Team. I think our history what weve learned and what we know, i mean, this is putting together a strong nucleus to build off of. And finally, you make the point that the conventional wisdom on the company is that everything will be fine if they can just close enough big stores quickly enough. You dont think thats quite the entirety of the solution. Well, i mean, i think there are probably some stores that are better off closed than not. The hard part with best buy, one of the challenges, the big stores are for 30 or 40 days a year when they do all their business. One of the things i would say is buy signal today. When people ask me if vendors will cut off best buy. To me the sentiment cant get lower than that and odds of that happening are zero. Down two bucks today like it was nothing. Thanks so much. Talk to you soon. Breaking news here. Lets go back to kate kelly at headquarters. A few Additional Details about Insider Trading case arrest from the u. S. Attorneys office for the Southern District of new york. We learned that the defendant involved here is a former employee of s. A. C. Capital known as as a quarter billion dollar of gains relating to inside information on two pharmaceutical companies. He worked at this unit of sac capital. There will be a press conference with more details on this at 12 30. The other thing weve seen is that they did indeed have large positions in the two Companies Involved in 2008. More on that as soon as we get it. All right. Kate kelly, thanks for that. Interesting developing story there. Weve got another important story here. My first on cnbc interview with hps president and Ceo Meg Whitman after the Company Announces a big writedown on accounting improprieties in part at autonomy, a company it acquired more than a year ago not under ms. Whitmans rule. A Difficult Run nonetheless. Meg whitman coming up next. [ female announcer ] the power to become a better investor has gone mobile. With features like scanning a barcode to get detailed stock quotes to voice recognition. Etrade leads the way in wherever, whenever investing. Download the ultimate in mobile investing apps, free, at etrade. Download the ultimate in mobile investing apps, free, if we want to improve our schools. What should we invest in . Maybe New Buildings . What about updated equipment . They can help, but recent research shows. Nothing transforms schools like investing in advanced teacher education. Lets build a strong foundation. Lets invest in our teachers so they can inspire our students. Lets solve this. Welcome to the world leader in derivatives. Welcome to superderivatives. Back to certainly the biggest news of the day. Hewlett packard, the largest lagger on the dow now trading at a decade low. The company saying as it released earnings this morning it was the victim of fictitious accounting. Ceo of Hewlett Packard is meg whitman. It doesnt go unnoticed by us that you were willing to come on whether good news or bad and so we certainly appreciate that. I want to get your response actually to some comments that are just out from mike lynch. A gentleman that you fired who ran, founded and ran autonomy, oversaw the sale to Hewlett Packard. He says hps Due Diligence was overseen by others and due dial generals was extensive and that he rejects these false allegations flatly. I would love to get your response to that. What i can tell you is that after i fired mike lynch for missing q2 numbers when he was part of the autonomy Management Team after hp bought the company, a senior accountant on his team came out to tell us about outright misrepresentations and disclosure failures and we launched an investigation, a forensic review of autonomys financials prior to the acquisition by hp and we believe that there is a willful effort on the part of certain members of autonomy management to mislead shareholders when autonomy was a publicly held company and mislead potential buyers including hp and we stand by the forensic we view that weve seen and as you know we have turned this over to the s. E. C. The Enforcement Division of the s. E. C. And the Serious Fraud office of the u. K. What would you say to those that say hp never should have bought this company but that you are now coming up with reasons as to why its value is not what it once was and not performing well and none of these will rise to the level of outright fraud. They will be things that were not done perhaps as well as they could have been at autonomy. Obviously we feel there was very serious accounting improprieties and misrepresentations. What i will tell you about autonomy is we still like the business. We like the technology. We think its going to be an important part of hp softwares Growth Strategy but not as valuable as we had believed it to be because revenues are lower, growth rate we believe will be slower and the margin is not what was reported which was in a 40 to 45 range. We think more 28 to 30 range. As you know when you do a tenyear discounted cash flow you come up with a different valuation and the price of the writedown that was in excess of 5 billion based on misstated financials when autonomy was a Public Company. You were of course on the board of Hewlett Packard at the time and agreed that the deal was one that should be undertaken. Do you regret that decision on your part and on the part of the board at that time . Obviously with 2020 hi hindsight were disappointed by the news. We relied on audited financials. Not brand x Accounting Firm. And thats what you do when you are on a board. You rely on the recommendations of management and the financials audited by a legitimate Financial Accounting firm. So obviously were disappointed. We feel terrible about it. I regret that i voted for this deal. We are where we are and now what we need to do is turn this over to the authorities, seek redress on behalf of hp shareholders to recruit what we can and then we want to take autonomy business and grow it because it does solve a real need in the marketplace on behalf of customers. Theres an explosion of data and theres some very Interesting Technology that helps Companies Make sense of all of the data out there in terms of, you know, their marketing plans and other important meeting based compute opportunities. Nobody expects a board at least my experience would not indicate to me that a board should be expected to have the forensic intelligence so to speak to understand when a company is committing fraud. My word. Not a word you guys have used. Nonetheless, there were a lot of doubts about autonomy out there in the marketplace regardless in terms of its growth rate and a number of investors who were questioning its accounting. Do you recall at all, did that come up in any of the conversation perhaps that the board had at the time who was the ceo . Not when i was on the board. What i do know is after we announced the acquisition there were a number of blogs that came to the fore about issue as autonomy. The former Management Team ran that to ground and came up with a conclusion that there was nothing there. Now often in a cutting edge company like autonomy, there will be rumors like this. They went through working with kpmg who hp hired to talk about these issues and talking to mike lynch and they ran it to ground and say theres no there there. Obviously we know different now. Were watching Company Stock decline today. Hard to say how much is due to autonomy news and how much may be due to investors concerned about the future for the company so lets go there for a moment. You hit the number that analysts were estimating the company would earn for this currently reported quarter. You have lowered guidance for the first half of next year although at the end of the day youre going to make it up in the second half. Why do you have confidence that the second half will be better than the first half of next year . First let me say q4 was a good quarter for Hewlett Packard. Generated 4. 1 billion worth of cash, which is more cash than many respected Companies Like disney and fedex and others reported in their most recent fiscal year and we reduced our net debt position significantly so working hard on restoring our balance sheet. I think people should feel good about that. In addition, earnings were about flat. Down 1 on an eps basis which is quite an improvement over the 39 we saw in q1, 22 and 9 decline in q3. You can see what were doing is were getting our cost structure in line with our revenue trajectory. Thats a real accomplishment for the company. As you mentioned, we are confident about our fiscal 2013 guidance from 340 to 360 a share but we guide what we think is realistic for q1 which is a tough Macro Economic environment. A lot of our savings in terms of our Savings Program will be back end loaded because a lot of that is labor now moving to europe where it is much more difficult to separate people and takes longer and then some of our nonlabor savings were instituting that executional excellence around skew reduction supply chain and those will kick in in the second half but perhaps most importantly we have some fantastic product coming up and i think ive been clear that Companies Come in on the backs of terrific products and those will kick in in the second half. Many would say that theyre going to have to. To those that would say what youre really do is managing a declining business because at the end of the day the rise of the tablet is actually the fall of the pc and printing because people just carry this thing around with them everywhere. How do you challenge that assumption that really all youre doing is managing a declining business. You may be managing it well. Thats what it is. Well, i would say theres two pieces of Hewlett Packard. Theres the printing hewlettpackard. Theres the printing and pc business, which the printing business is a flat business. Were seeing increases in enterprise printing and weve got some interesting products coming up in the consumer space. The pc business is a slow growth to declining growth business, but we call that our personal Systems Group and were introducing tablets for the consumer as well as the enterprise. Were excited about our elite pad 500. But thats only a portion of our business. 43 of the profits come from enterprise group, our serve e, storage, networking, Technology Services group that is doing some very interesting things. Our storage business is growing double digit. Our hyper skill business is growing very fast, so weve got a growth part of this company, then a part thats Slower Growth that were managing for cash, but thats okay. Youve got to be smart and again, weve got some great products coming up that will eventually turn the revenue trajectory as a whole. But thats a long time. You have made the point this is going to be a long turn around. Three years, four years, even five years. I would say sum you still believe thats the case. I do. We are one year into a fiveyear journey. Weve said 2013 is a fix and rebuild year and that you will start to see revenue grow again in 2014, as our products hit the market in a really meaningful way. Weve made some of those investments in terms of our ability to do business with the challenge. A revamp of our go to market. So i think in 2014, youll start to see revenue growth, but we have been very clear that this is a journey. It hp didnt get into this situation overnight. It took a while and its going to take us a while to get back, but i have to tell you, i feel great about the h p p employee base. And our products. But how is you know, i mean, just in terms of their mood right now, watching a stock price at a 12year low, 22 billion market value on this Iconic Company seems hard to imagine. I would assume thats got to be affecting moral at this point, not to mention the fact you find fraud in a company you bought a little more than a year ago. Weve been incredibly transparent in our communications to employees and yes, theyre disappointed about the performance of the company, the stock price, but there is a commitment and resilience to hp employees that i think youre going to see us come back here in a very meaningful way and its not quick. In todays market, people want a quick fix. There is not a quick fix here, but i know when you line up 300,000 hp people against a mission, i think were going to deliver here, but we have to manage expectations about how long this will take. Part of the way hp got into trouble is shortterm fixes that didnt actually lay the foundation for the next five years of hp. And youve got to build for the future here. Yeah, could you pump up earnings for next quarter, next year . You could, but it wouldnt lay the foundation for what we must have in terms of the foundation to build the next generation of hp products. Meg, some critics mikt say introducing a tablet next spring is not layine groundwork for the future. Given that the tablet has existed and gained so much penetration. What can you say about the next generation of product . The future product beyond the tablet next spring that hps got in the works . So, with regard to you know, our personal Systems Group, weve got two tablets, convertibles, which i think is the next generation form factor. A lot of people want tablets, but most want to end up carrying a laptop plus a tablet, plus a smart phone, so if we can give them a great laptop that is also a tablet, im excited about that next generation of form factor and then what you see in january is our tablet design for enterprise. This is a tablet that has a ten and a half hour battery life with its smart jackets, another ten and a half hour battery life. You can service it. You can take off the back and change out the motherboard as well as the screen. Were going to continue to be innovative on our form factors and what consumers and employees want in their personal devices. The need to create, consume and share is not declining. Thats actually growing and weve got to have the right form factors and products. But i am equally excited about the enterprise side of our business in terms of storage and networking. To put it bluntly, certainly the last 14 months or so of you running this company has not been easy. Is this the worst its going get . Can you make a promise, no more bombshells in terms of accounting and nothing unexpected on the earnings front . Listen, i know what i know today and i feel good about hps position. Our products, about how weve reorganized ourselves, the investments weve been making, but this is a turn around and turn arounds can be unpredictable. I dont see anything on the horizon. I think weve gotten the bad news behind us, but in a turn around, you never know whats coming at you and ive done a couple of turn arounds in my career and you have to be prepared for the unexpected. I dont see anything today i would assume in mid may before you learned of this, you probably didnt expect it either . I did not. Did you think at the time, what did i get myself into . You know, listen, i knew i was getting myself into a turn around and i did it because i care cared about hewlettpackard, what happened to this country. Its important to the technology industry. To every community in which we do business. Im proud to lead this great company. Were going to bring this company back, but its a real challenge, i have to say, and you know, usually things that are worth doing are a challenge and this certainly is one. And to those who raise the cry yet again they should break it up, that its time to just return whatever value is left in this company to shareholder, what would you say . Id say i believe the parts of hp are better together. If we manage our portfolio of assets, printing, pcs, server, storage and network, were very conscious about investing prominently for a right return on invest and capital. Some businesses for growth. Then thats very responsible. There are go to market synergies. Supply chain synergies and so i feel that this is the right strategy to keep this business together and my view is well see the results of that in 2014. All right. Well, we will see you im sure before then. We appreciate the fact youre willing to come on. Thank you again, as always. Thank you. Meg whitman, ceo of hewlettpackard. More on the bombshell, including commentary from apple ceo. Back in two minutes. [ male announcer ] tradings like a highspeed train. And you dont want to miss it with thinkorswim by td ameritrade. You get knockyoursocksoff tools, simple oneclick orders, realtime paper trading to hone your skills, plus anytime you need it support. Stocks, options, futures, and forex. Get your trading on track. Thinkorswim by td ameritrade. Trade Commission Free for 60 days, plus get up to 600 when you open an account. Or that printing in color had to cost a fortune. Nobody said an allinone had to be bulky. Or that you had to print from your desk. At least, nobody said it to us. Introducing the business smart inkjet allinone series from brother. Easy to use. Its the ultimate combination of speed, small size, and lowcost printing. Welcome to hour three of a 10. 3 billion deal that closed in october of last year. I think we should remember the fiscal cliff is a policy choice. These leaders instituted this system in order to discipline their actions. And they better make good on that promise to the American Public in the next 30 days. Sticking by the company itself Still Believes its technology is very strong. Really . Just nowhere near worth what they paid for it. Hewlettpackard started to suffer the minute they did that deal. Zpl you think people are apple are laughing . I feel like i should take the pc and just throw it out. What have i got here . Then a dell. We launched an investigation, a forensic review of autonomys financials and we believe that there is a willful effort on the part of certain members of autonomy management to mislead shareholders when autonomy was a publicly held company and this lead potential buyers including hp and we stand by the forensic review that weve seen. That interview hitting on about the 207 point rally yesterday. Dow giving back about 35. S p down a couple of points. Hedge fund Tiger Global Management giving a big boost of confidence to groupon today after acquiring a 9. 9 stake. Shares up more than 13 and Green Mountain coffee naming brian kelly to be the new ceo. The executive hired away from cocacola where he was recently promoted to president. Back to hp, of course, leading all the news today. Just hearing from meg whitman, david, some thoughts on the good face shes trying to put on the company in the wake of this bad news. Listen, those who believe that hp will survive and thrive in the future will point to megs ability to communicate with an enormous organization that has 300,000 people. I think you saw some of that there in at least her faith in the company, her belief in this longterm turn around she talks about. That being said, obviously, a very tough day for hewlettpackard, shareholders, many of which are throwing their hands up at this point in part because of the autonomy, misrepresentations and they dont believe that in the second half of the year, despite meg saying so, that the company is going to make up the ground it loses in the first half of the year. Then when you ask about her game plan, she talks about these products. The first in january, the second in the spring, but tablets have been around for so long at this point, is that really going to be the foundation for growth for the next five years as this turn around happens . Is a convertible tablet going to be enough to reignite sales here. Of course she said were excited about networking and these other businesses. And list, the company is generating a decent amount of cash. Its something she came back to. 4. 1 billion in this quarter. 10. 6 billion through the year at this point. That is not insignificant. She talked about how the costs are more aligned now with the revenues, but that doesnt take away from this overall view that this is a declining business. One that is dealing with with the rise of the tablet and people not printing things the way they used to. Former management as she just said, knew there were suspiciouses about autonomy. She cited specifically some blogs that said management looked into some allegations. A lot of shorts chattering about the nature. Found nothing there. Then said we know different now. They ran them to the ground and you have to wonder, jim chenos was so specific on his report on autonomy. He was short of course autonomy, then shipped of that short to hewlettpackard. You wonder if they really did run it to the ground if they would have found them. If you misseded the interview, here is meg whitman on the companys bombshell accounting scandal just a few moments ago. Weve launched an investigation led by pwc, a forensic review prior to the acquisition by hp and we believe there is a willful effort on the part of certain members of autonomy management to mislead shareholders when autonomy was a publicly held company and mislead possibly btential buyer including hp and we stand by the forensic review that weve seen and as you know, ef turned this over to the sec, the Enforcement Division of the sec as well as the Serious Fraud office in the u. K. Weve heard from mike lynch, the former head of autonomy. Now, from the former head of hp. Quote, im both stunned and disappointed to learn of autonomys alleged accounting improprieti improprieties. Meticulous and thorough. One has to wonder just what that means and meg did point out and mention by name, the firm of deloitte, the Auditing Firm that signed off on autonomys numbers. Well see where this goes. It is certainly early days and they have referred this to the s. E. C. And Serious Fraud office in the u. K. That is they have referred the findings, hp has, but its early days for that. Its only been recently they did send it their way. An investigation is obviously going to continue. Well see if if it ends up with charges. Meg did everything she could to not use the word, fraud. She called the misrepresentation outright and willing, but did not go to the fraud word. No, i guess thats something we could ask our next guest because harvey pitts the former chairman of the s. E. C. Hes currently the ceo of calirama. Why not just refer to it as fraud . Given all the words theyve used, knowing a bit about what at least they allege, whats your take here in terms of fraud or not fraud . It certainly is the plain import of them saying its froud. The only thing i can think about the perhaps the lawyers suggestion, that they use some less assertive words, but the allegation is fraud. The biggest problem i think that hp has though is can explaining its own failure. Let eat try to separate the blame here. If youre deloitte, how nervous are you today . I think deloitte has to be both nervous and girding up for a long battle. I think this is when you have a right to this magnitude, people Pay Attention and deloitte is going to come under real scrutiny for its certification of Financial Statements and its failure to find any indications of this kind of fraudulent behavior. Are you beginning to detect similarities to Arthur Anderson . I think theres a huge difference. The anderson situation involved a long string of cases the government has been appropriately chastised by itself and by others for allowing the firm of Arthur Anderson to disintegrate. There are penalties and steps that need to be taken, but the last thing the Global Economy needs now is one less big major Accounting Firm. Harvey, if im a shareholder at home of hewlettpackard, im pretty mad now and looking to the broad and board may not have t resources to detect fraud if it is fraud. At the same time, i know that a lot of blogs out there and notes short sellers raised the flag on autonomys accounting practices, specifically. Could the fraud, could the board be found at fault in any way given there were some people out there who had detected that there could be fraud on the books at autonomy . Well, i think boards responsibility may well have been focused or should be focused on why the people doing Due Diligence didnt pursue some of these issues. One of the things that people are going to have to look at are what are the reports to board got before they approved the merger, but almost the second it was announced, serious questions were raised, both about the viability of autonomy, as well as the question of whether hewlettpackard had overpaid. Those questions were so instantaneous that one has to ask where the Due Diligence was within hewlettpackard. That, to me, is the central concern out of all of this. Harvey, thats going to happen now to the s. E. C. . Its early days is my understanding in terms of ou they only referred this information to them. Not very long ago, but what is going to take place here in your opinion at least giving the facts as we know them . Well, i think both in the u. K. And in the u. S. , the government regulators are going to commence immediate investigations. They will assign teams of people. They will immediately subpoena documentation and at all of the organizations, hewlettpackard, autonomy and deloitte, people internally in those firms should be issues do not destroy notifications. One of the sad things we noticed after enron was that there were documents destruction programs that took place both at anderson and at enron. That was one thing we were very sensitive to at the world come. Finally, just for me, harvey, once again, in their statement, they say accounting and proprieti proprieties, misrepresentations to inflate the underlying financial metrics, so, it is correct to use the word, fraud . Absolutely. That is all verbage intending to communicate that they were defrauded. All right. Har thanks so much for joining us. My pleasure. Want to get to the cme group. Rick santelli has the Santelli Exchange for this tuesday. Hey, rick. Good morning, carl. You know, compromise sometimes means a lot, but one thing that has bugged me a bit and that of course is the notion that statistics sometimes compromise reality, now, we know that when it comes to jobs, there has been a lot of information out there and me in particular, if we look at four years in terms of president obamas first term and we look at jobs, if you include the 356,000 benchmark revisions, that doesnt go in the bureau of labor statistics until february and you look at the fact he has created 194,000 in his four years. That comes out to about 550,000, okay . Thats interesting. Now, lets think about what we look at when we think of Small Business. According to the tax policy center, theres about 20, 22 million Small Businesses and about 3 of those Small Businesses are affected by agi adjusted gross income at the threshold of 250,000 that is at the epicenter with this ongoing debate. But i guess what im saying is 3 of 22 million is no small number and when we look at the amount of Small Businesses that are impacted by that, we always think percentages, but i will tell you, sometimes, percentages dont really get the picture across. Yesterday, moodys took away the aaa rating of france and their twoyear note is trading 14 basis points today. So, when i go on the air, i say you know, its up four basis points. But when i represent the facts in the most accurate fashion if i said, oh, my god, twoyear note yields are up 40 in france. No. Of course not. Thats why very few people use percentages when they talk about Interest Rates. Especially very shortterm Interest Rates or t bills. How many did we have a few years ago where the rate on a six month or three month bill was under ten basis points. Same analogy. So when you take that 3 and think about maybe theyre going to not add one employee or not add two employees, all of a sudden, these numbers against the context of how many jobs created in that first term really starts to take a shape that i dont know has been adequately expressed. So remember, it is all about jobs, jobs, jobs and its the 3 solution. Doesnt seem like much of a solution. Carl, back to you. Dont go too far. Talk to you in a few moments. Meanwhile, tonight on fast money, i cant imagine whats going to lead the show. Well see what hes doing with it right now. The ceo of dvr, a trust that handles mall operators, so which retailers are signing up the most properties goin into next year and how is the Holiday Shopping season shaping up and what the maker of sd energy thinks of the big crackdown on these energy drinks. You have said this is just the first chapter. Were getting stuff as we go along and well will reporting it throughout the day as we continue to get statements from the likes of who oversaw the opposition and ran it briefly when it was a part of. Statement from deloitte is what i want to hear next. Still having some meetings regarding that there. Thanks, guys. When we come back, john skucull will weigh in on hp. Up next though, france getting downgraded. The effect has been relatively muted in europe. Back in two minutes. I put away money. I was 21, so i said, hmm, i want to retire at 55. And before you know it, im 58 years old. Time went by very fast. It goes by too, too fast. But i would do it again in a heartbeat. [ laughs ] [ male announcer ] tis the season to discover the kid in all of us. The memories that last, start with the gifts that last. Enjoy Free Shipping and great values on your Holiday Shopping from l. L. Bean. Is what drives us to broadcast the worlds biggest events in 3d, or live to your seat high above the atlantic ocean. Its what drives us to create ecofriendly race tracks, batteries that power tomorrows cars, nearly indestructible laptops, and the sustainable smart towns of the future. At panasonic, were driven to make what matters most better. Just another way were engineering a better world for you. Breaking news here. Take a look at crude. There are reports surfacing that there will be a cease fire between israel and gaza. 87. 31 was the low on west texas. Present has fall ben to a session of 110. Again,s citing officials of hamas that there will be an egyptian brokered cease fire that will come into force at midnight local time. We will see. Meantime, well go to julia boorstin. News corp. Is announcing it is acquiring a 37 stake in yankees entertainment and sports network, so this deal thats been in the works for a couple of weeks now, news corp. Is acquiring a minority stake, now, this deal is subject to Major League Baseballs approval, but is expected to close. The current owners are Goldman Sachs and Providence Equity. My understanding is that news corp. Would be buying out Providence Equity and Goldman Sachs and that the yankee Group Enterprises would maintain its stake. We can reassure you that yankees baseball will stay on the yes network. There is a deal to keep them on through the year 2042. Back to wrou. Gives them lots of time to win more pennants, rings. David fabers stuck onset to talk about this. We know that being men of fairly young ages, not to mention it is perhaps the only kind of programming that most people do not dvr. You want to watch it in realtime, therefore, youre more likely to watch the ads. We have seen the bidding soar and this is an important agreement because it will give news corp. The opportunity to take control of the network, believe it did preyears,. So, an important deal for news corp. , which has had an eye open for news corp. Certainly one here in the new york area thats so important. Does raise the question as they have two children to feed. How much love theyre going to give to the high flying Entertainment Group and how much is the publishing side going to get. Were not going to see the slit up become effective. I think the its not going to be until the Third Quarter of next year perhaps, but they feel already like orphans, if you talk to many people at the slow growth publishing company, this obviously being done from a different part of the company, that one that has the more rapid growth, the one that includes all of the important cable networks. Seems like everybodys got this. J. C. Penny, everyones try iingo ride these two rails. Its difficult to do. It is. And in fact, its the Digital World that is coming in and that they have had to manage so much of the print side, but done a bit better. Just as it is for hewlettpackard and the advent of mobile devices. Just getting buzzier and busier. Meantime as we say earlier, hp trading lower. The deal was announced under the former ceo and since then, he and autonomys ceo have been fired. Heres meg whitman on how the company is moving on. I know what i know today and i feel good about hps position. I feel good about our products, about how weve reorganized. Turn arounds can be unpredictable. That is saying the least. Peter, good morning to you. Good morning. First off, just reflections, reactions to the autonomy. We thought this was going to be a mess, but wow, much worse than i thought. We talk today a lot of clients who were short autonomy, then hp took them out. Theyre all saying we told you so, we find it a little difficult that hp didnt have some idea of what was going on and more importantly, how the rest of their business is really floundering. I would argue that the pc business, printing preside inin in difficulty. Im seeing how long have you had a less than stellar rating on it and how much is there any sign to you at least that you might change your rating if it gets to a more decent valuation . Theres been a 40 downside. We were a hole awhile before that. As we look at the issues facing hp, we think theyre a full year guidance. I cant believe they maintained it. We would have expected them to take it down after q 1 guidance. We just dont see how its possible. Convertible tablet is not going to cut it. Those products exist and are not selling. Windows 8 has not been selling. We dont know how theyre going to do it. Do you think at some point for those buying the stock on a lark, enjoying a nice 4 yield, given the cash situation over there, is or isnt the dividend not in my danger right now . We would argue as the situation becomes more dire, could be serious danger. They have some big bullet payments that people are forgetting they have to make. Theres approximately 10 billion over the next 12 months that has to be paid back. I would argue bondholders are going to demand more interest and if not, as well as some additional security. Meg has said they hope to recoup what they can, but i would assume any redress theyre able to get through help with the s. E. C. What have you, is that material or not to your larger view of the company . The board agreed with this acquisition. They had it on strategic views and its a bid of a side show. The pc business is in decline and printing business is in structural decline. Interesting insight. Thanks so much for your time today. Busy news day. You heard the news here first from faber, then the first comments from meg whitman. We believe that there is a willful effort on the part of certain members of autonomy management to mislead shareholders when autonomy was a publicly held company and mislead potential buyers including hp and we stand by the forensic review that weve seen and as you know, we have turned this over to the s. E. C. With that, john skulllys take. Well be right back. Twins. I didnt see them coming. I have obligations. Cute obligations, but obligations. I need to rethink the core of my portfolio. What i really need is sleep. Introducing the ishares core, Building Blocks for the heart of your portfolio. Find out why 9 out of 10 large professional investors choose ishares for their etfs. Ishares by blackrock. Call 1800ishares for a prospectus which includes investment objectives, risks, charges and expenses. Read and consider it carefully before investing. Risk includes possible loss of principal. Bernanke, hp, you name it. Two dominant headlines in europe this morning. We think greece may get some money, then the downgrade in france. Start with the euro, which got a boost early on and the expectations that we are going to see maybe money for greece. Just a half an hour ago, we saw finance ministers beginning their meeting where they expect they will get thats what were talking about, to keep the whole Financial System there stable at this point. The other big headline is moodys downgrading france. Really take a negative look at frances economy and say it continues to lose come pettiveness and the new president there has doubled down on a lot of the issues that prevent france from growing as fast as it could. Doesnt look like its any worse for ware for the french stock market because it was widely expected. This is the tenyear by about seven basis points. 2. 1 . They have been climbing very studly today. Lets go on to the other country making news there this morning. Spain was able to borrow a lot of money this morning. More than they expected. So thats the good news. This is the spanish stock market. Lower by a quarter of a percent. Not a huge move. Show you whats going on with the tenyear yield in spain. Yes, they were able to borrow more than expected. Still, worrisomely elevated is the way to describe spanish 5. 8 for the tenyear. Show you whats going on, weve been talking about potential fraud at a u. K. Company. Lets tell you about some real fraud that we learned about or was talked about today in the u. K. The exubs trader was found guilty of fraud, sentenced to seven years in prison in connection for the 2. 3 billion loss for unauthorized trading. That happening in the u. K. And then credit swis, they are going to whittle down this company into two different divisions. Investment banking and also private wealth management. This is to reflect the new regulatory reaelt that all banks face in the world. All higher . Spain was lower, but not by much. Back to you. So nice to have you down here. See you at 1 00. Of course, also overseas, there are reports of an imminent cease fire in the middle east. Eamon is in gaza with the latest there. Good evening. Can you hear me . Theres a slight delay to that spot where he is in gaza. Well try to get him back in a little bit. In the meantime, take a look at what oil has done after news of that cease fire, at least after reports began. Also the israeli sheckle is higher. Scott . Were going to take a break. Dont go away. Can i help you . I heard you guys can ship ground for less than the ups store. Thats right. Ive learned the only way to get a holiday deal is to camp out. You know weve been open all night. Is this a trick to get my spot . [ male announcer ] break from the holiday stress. Save on ground shipping at fedex office. Or that printing in color had to cost a fortune. Nobody said an allinone had to be bulky. Or that you had to print from your desk. At least, nobody said it to us. Introducing the business smart inkjet allinone series from brother. Easy to use. Its the ultimate combination of speed, small size, and lowcost printing. A market moving event at 12 00 p. M. , when ben bernanke speaks. Is hewlettpackard worth more broken up . Find out as the stock plunges to a tenyear low and what the feds describe as the most lucrative case ever. Carl left you hanging there. Youre going to have a busy hour, scott, ill just say that. Thanks. As i mentioned earlier, there are reports of a cease fire in the middle east. Want to try and get you make to eamon, live in gaza. Good evening. Good evening to you. A short while ago, egypts president gave the biggest indication there may be a cease fire announced later today. Ive been speaking to egyptian intelligence officials who say talks are still ongoing in egypt. They say theyre hoping to have an announcement later this evening, one that could come as early at 7 00 gmt. But egypts president did say that the socalled aggression on gaza would come to an end by tuesday and israels radio is reporting that senior officials in the government say a truce has been reached and it could be reached as early as 8 00 this evening with the arrival of secretary of state hillary clinton. But whats happening on the ground here is far from a truce. In fact, the death toll has now climbed over the past seven days to palestinians killed as a result of israeli air strikes. Within the past several hours, there have been air strikes all across the gaza strip and the military has been releasing these pamphlets warning citizens and residents of those areas to flee to escape, to move away from their homes, to go into the more densely Populated Areas in gaza city itself and that is an ominous sign, according to many, that in fact if this truce isnt achieved today and officially declared this evening, that a Ground Invasion and full blown war could be on the horizon in the coming hours, so theres a great deal of anxiety. A lot of pressure and a lot of diplomatic activity. No one is quite sure how it is all going to pan out in the coming hours. Certainly all markets around the world trying to figure that exact thing out. Thank you so much. Live to want in gaza. Bob pisanis made his way to post nine here where he started out the day saying housing would lead and it is. And i was getting excited about howing and the street agrees with me. Housing is leading. Its the sector thats up the most. Take a look at the big names here. Remember, we did drop a little right after the elections and after concerns about mortgage interest, but 6 , thats a lot. You see everythings up roughly 5 on the day. Lets take a look at whats going on. Its the Housing Starts number thats really exciting. Best since july of 2008. And remember, heres your all time high. Long time ago, january 2006, 2. 2 million, today, were at 894,000. Believe it or not, thats an upward slope and moving in the right direction. Were going to hit 1 million probably in the middle part of next were. The important thing here, existing home sales also moving in the right direction here. They were out yesterday. Theyre up 11 . Theres your old high. 7 million, now, 4. 8 million. Remember, the trend line is moving in the right direction and thats the kind of thing we like to see. Lets look at the numbers for Home Building sentiment. We had that out yesterday as well here. 46. That was well above expectations. Look at that trend line. That was the historic high. The trend keeps moving to the upside. Thats what were looking for. Dr horton was talking about last week the idea that october and november, their orders were continuing to be strong. Thats one of the big, big homebuilders. Thats been moving to the upside recently. Important thing is that the trends are all moving in the right direction. Heres why im getting excited and watching thinki ining thing. The number of houses for sale are decreasing. Four and a half months yesterday. Household formations are increasing. Home prices are increasing, o y okay, this is what you want to see. These are the trends that are making me more happy about whats going on in the Housing Market. One final thing, hows Hurricane Sandy impacting Housing Starts . Its really not. The bottom line is this on Hurricane Sandy. It takes cities a long time to approve permits. Its going to be to happen over one month, two. Sandys new building is likely going to be spread out over several years. T not saying theres no impact in the northeast, but the impact is going to be spread out over a long period of time and i think youll see it rather muted. None is less, right now, housing is the leader and were seeing autos also pretty well. Theres reason for some optimism on the u. S. Economy. Poulty is still the number one name. Thanks, bob. After david faber broke the news here first, we brought you the first comments from meg whitman of hp. Were disappointed. We feel terrible about it. I regret that i voted for this deal. Now, for his first take on the bombshell, john sculley after a break. Dont go away. Look, if you have copd like me, you know it can be hard to breathe, and how that feels. Copd includes chronic bronchitis and emphysema. Spiriva helps control my copd symptoms by keeping my airways open for 24 hours. Plus, it reduces copd flareups. Spiriva is the only oncedaily inhaled copd maintenance treatment that does both. Spiriva handihaler tiotropium bromide inhalation powder does not replace fastacting inhalers for sudden symptoms. Tell your doctor if you have kidney problems, glaucoma, trouble urinating, or an enlarged prostate. These may worsen with spiriva. Discuss all medicines you take, even eye drops. Stop taking spiriva and seek immediate medical help if your breathing suddenly worsens, your throat or tongue swells, you get hives, vision changes or eye pain, or problems passing urine. Other side effects include dry mouth and constipation. Nothing can reverse copd. Spiriva helps me breathe better. blowing sound ask your doctor about spiriva. Welcome back with more breaking news on the complaint. The im sorry, against a former employee of s. E. C. Capital. New questions are now circling around. The owner of that hedge fund and specifically some conversations it appeared he had with the defendant in this case in 2008. According to the complaint on or around sunday, july 20th, 2008, martoma emailed someone known as the hedge fund owner. Is there a good time to catch up with you this morning, its important. The two proceeded to have a discussion, a little later that morning on cohens cell phone. Then the following on or about monday, july 21st, instructed the hedge fund owners senior trader to begin selling the elan position in anticipation of possible good news on a drug elan was developing. This language in this complaint draws questions about whether the founder and owner of sac capital was directly involved in these trades. Its not clear what we knew. He is pointed as someone who may have gone rogue. So, its quite possible that he was acting alone. Kate, obviously, you want to be very careful here, but youre analysis of what you know so far as it relates to cohen himself . This is the thing, carl. Sac capital has implicated for ef several years now. Other employees have been found guilty in some cases for engaging in inside information, but however, up until now, cohen has been able to say look, these were rogue actors. All appear to have left the firm sometimes before charges were brought. We dont know this was cohen and we dont know what he knew about where martoma was getting his information. Hopefully, well get more clarity at 12 30 with a press conference. Colliding with a Bernanke Speech as well. Thanks a lot. Big day, big news of the day, hp announced it was the victim of dodgey accounting. Heres meg whitman this morning. What i do know is after we announced the acquisition, there were a number of blogs that came to the floor about potential issues at autonomy. The former Management Team ran that to ground and came up with the conclusion there was nothing there. Now, often in a cutting edge company, there will be rumors like this, but they went through working with deloitte and kpmg, who hp had tired to talk to deloitte about these issues, as well as talking to mike lynch and they ran it to ground and said theres no there there. Obviously, we know different now. Obviously. Here to weigh in first, john sculley, the former ceo of apple. John, its good to have you back. Good morning. Morning, carl. Id love to get your analysis, your thoughts as to what must be going through megs mind today and specifically on that notion that management at the time, they knew they were critics, skeptics and according to her, found nothing there. Whats your take . I would be asking the question of who was chairman of the Audit Committee at the time the board made the decision to buy autonomy. Looking back in on my ten years as ceo of apple and many years at metro p krrkcspcs, the one t know is revenue recognition is the single most important thing to keep your eye on. As i heard the revelations today, i wasnt thinking so much about fraud, but about gee, these are things which any experienced operating executive would be asking questions about and im surprised it didnt come up sooner. Right, and for those of us who have never served on a board, help us understand how granular it gets. How much are you expected to know even on the basic points that deloitte or whatever Accounting Firm you have gives you . Well, you are obviously loobing to experts and in this case, deloitte. You also look to the head of the internal Audit Committee, an employer of the company, but reports to the chairman of the Audit Committee in most corporations and you would be asking the sort of intuitive insights as to what does it mean when you are bundling heart ware with software when you are a Software Company . When you are taking large amounts of up front license fees and then deferring lower amounts of licensing fees in the out years. Why are you giving special incentives to value added resellers so push the software . So, these are sort of questions which arent about just the technical legality of the aaudi, but are really just Good Business judgment questions, which youd expect any experienced executive to ask. So some some are trying to put themselves in the head of high pressure. Some suggested they were so hungry for a transformational deal of any kind that they maybe looked past some of the issues coming up. Do you look past that board or do you think theyre really a victim here . I dont have any insight so that because i wasnt there. Running a big, hightech company is not an easy job even in the best of times. What i would say though is that i heard megs answer to some very tough questions this morning on cnbc. I think the company is really fortunate to have meg whitman as ceo. I knew dave packard. I think hes been extremely impressed to see the leadership meg is giving, so this is a really tough time for high pressure. It isnt just autonomy. They bought eds. At exactly the wrong time and had to take a big write down. Theyre in this secular change with pcs and printing. So, its tough time, but i think theyve fot an excellent leader with meg. I think a loft people share your sentiment regarding meg. Those of us who know her and even the fact she came on today and faced those questions, says a lot about her leadership. Absolutely. But john, longterm, is she there to land this plane in a crash position as softly as or can she really pile at the turn around she seems to have in her head . I think youve got to look at it through a couple of different perspectives. First of all, shes doing the smart, shortterm things she has to do. Shes managing cash and doing that well. She is trying to deal with crisis. Shes doing that well. But anyone whos been in the hightech world for a long time knows that the real longterm success of Technology Company is the leadership of its products and hp went on for several years during the Previous Administration where they chose not to invest in r and d and so meg has a big catchup job to do. I think hp could surprise people as mobility and cloud become bigger, as we move into the sense era, the nex era after smart phones. Theres no reason why hp cant find its innovation roots again and surprise people, but its going to take several years. This is not a one or twoyear turn around. This is a multiyear turn around. John, thank you so much for coming on. Well see you later. F. Thank you. John sculley talking some hp today. Still ahead, how does hp or any company prevent Something Like this from happening again . Our task force weighs in, just a moment. Of tablets from dell. Its changing the conversation. Who have used androgel 1 , theres big news. Presenting androgel 1. 62 . Both are used to treat men with low testosterone. Androgel 1. 62 is from the makers of the number one prescribed testosterone replacement therapy. It raises your testosterone levels, and. Is concentrated, so you could use less gel. And with androgel 1. 62 , you can save on your monthly prescription. [ male announcer ] dosing and application sites between these products differ. Women and children should avoid contact with application sites. 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Want to dig deeper into hps management woes and how the Company Ensures Something Like this never happens again. Bill george is the former ceo of medtronic, jeff seinfeld, gentlemen, we have a doo cyzy on our hands today. First of all, i feel sorry for meg, carl, but i think this has gone far enough. 6 billion on eds, 9 billion on autonomy. Yes, john sculleys right. You should ask questions. On software deals, theres always a lot of questions. I think this put the panic into a lot of shortterm actions. Softwares 4 of the re knew. They have no strategy. The board has been focusing on shortterm fixes. They havent developed any leaders. Four times theyve gone outside the company and i think its time for a change. Frankly, i think meg is doing a great job of being honest. 2014 is a long away way and earlier this morning, i think its time to split the company and acknowledge that pcs and printers are a hardware business. Sam did that ten years ago at ibm. Its time to spin it off. It will be a 60 billion company. Get all those corporate costs out of it and run it. You cant replace ten years of not running rnd. Its down to two and a half. I think take the rest. Enterprise systems, services, and whats little bit of software there and really try to build that up and try to compete in the system side and then let the printers and pcs get down and be a Hardware Company and meg can run the hp and can go back to its roots. I think it can work very well, but i dont think we just go on the way we are. This one and another one im managing for cash. And shes right. Unfortunately, bill, i think youre two years behind on this one. They have the right person in there as she doesnt have a year on the job yet and she made a lot of changes. Bill, you would be throwing out one of the highest growth areas. Thats 14 growth. Considerably well there. Theyve got a lot happening in software. Yes, they have been underinvesting in the past in new products. This companys now cash rich. Got to give credit and the personal systems, maybe their secular decline, but theyve been generating a lot of cash which may have been reinvesting in these businesses. Theyve got lots of new products coming out now, even in printing. Printing has an avalanche of new products coming out. They have the love of big corporate clients and personal trending is down. But corporates going to be there, be strong. Gentlemen, i cant believe were out of time. S