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HP OZ Reports Record $58M Loss After Being Hit With $3M For Misleading Consumers

By David Richards | Sunday | 07/07/2013

EXCLUSIVE: Hewlett Packard Australia, which was ordered by a Federal Court judge on Friday to pay a $3M fine and $200,000 in legal costs for misleading consumers, has reported a massive $58,238,000 loss for 2012.

What is not known at this stage is whether HP's consumer PC division, which the US company was looking to sell 12 months ago, was a significant contributor to the losses. IDC reported that their PC market fell over 20 percent last year in Australia.

Also unknown is which Australian executives made the decision to engage in misleading consumers and whether there will be any personnel fallout from the Federal Court decision.

According to documents filed with the Australian Securities & Investment Commission, HP Australia went from a profit in 2011 of $134M to a loss of $58M in 2012. A contributor to the loss was a $30M tax liability.

Sale of goods revenue in 2012 slumped from $2.58 billion in 2011 to $2.18 billion.

Also slumping was finance revenue, which fell from $6.3M to $5.16M.

Despite losses and a fall in revenue, wages and salaries at the company rose by 80 percent, from $440M to $754M.

Marketing costs also fell from $38M to $32M. It is not known how much of this expenditure was co-op dollars attributed to retailers selling HP products.

The Federal Court  slapped Hewlett-Packard with the $3 million fine after a lengthy investigation by the Australian Competition & Consumer Commission, which concluded that HP management engaged in a "widespread and systemic" process that resulted in hundreds of consumers being misled by the Australian subsidiary.

ACCC chairman Rod Sims said it was an important case. "The misconduct was widespread and systemic from a very large multinational firm." 

Rather than face court, where evidence would have been presented in an open court, HP Australia chose to negotiate a settlement. The court found that HP gave clients misleading advice on their consumer guarantee rights.

According to ACCC sources, HP management involved in marketing HP PC products in Australia instructed HP call centre personnel to tell customers that products purchased online could only be returned to the company at its sole discretion, which was also how it determined product remedies.

HP retailers have also been implicated in the companies' misleading conduct.

Consumers were told that they were required to have their product repaired multiple times, before being entitled to a replacement.

Another false claim was that the warranty period for HP products was limited to a specified express warranty period.

The ACCC initially instituted proceedings against HP on October 16, 2012.

The year 2013 is not looking any better for HP, after research group IDC reported that the Australian PC market had declined 21 percent in the first quarter of 2013, compared to the same time last year.

HP took the top slot in the Australian PC market in the first quarter of 2013, with a 19 percent share. 

IDC is forecasting a further decline of 15 percent across the Australia and New Zealand markets.

The announcement that HP had deliberately engaged in a process of misleading consumers and had been fined $3M after a series of discussions with the Australian Competition & Consumer Commission was made late on Friday afternoon.

It is not known whether HP proposed a Friday afternoon announcement to the ACCC in an effort to minimise the PR fallout from the Federal Court decision. 

Late on Friday, neither HP, nor their PR company, refused to supply a spokesperson for the company.

Shortly after calling HP and PR company Burson Marsteller, SmartHouse got a spin statement from Biana Harkovskaya, Acting Media Relations Manager HP Enterprise Business, South Pacific.

Receptionists at both HP and Burson Marsteller said they had been instructed to take the names of media personnel.

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