From the course: Financial Modeling and Forecasting Financial Statements
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The costs of being wrong
From the course: Financial Modeling and Forecasting Financial Statements
The costs of being wrong
- Sales forecasting is not an exact science. Lots of things can go wrong. For example, sometimes data are misinterpreted. Also, it's often the case that the future just doesn't turn out according to the forecast. The future is an uncertain place. An example of data misinterpretation arose in the acquisition of Autonomy by Hewlett-Packard or HP. HP is a hardware and software company based in Palo Alto, California. In October 2011, HP purchased Autonomy, an enterprise software company founded in Cambridge, England. The purchase price was $11 billion. Just over one year later, in November 2012, HP announced that it was recording a $9 billion impairment loss related to the Autonomy acquisition. This means that HP had determined that the value of Autonomy wasn't $11 billion. It was just $2 billion. Now, this case is still in the courts. HP has accused Autonomy of manipulating the reporting of its sales, and Autonomy…
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