NEW YORK -- Hewlett-Packard said Tuesday that a British companyit bought for $10 billion last year lied about its finances, resultingin a massive write-down of the value of the business. Shares dropped onpace toward a 10-year low.

CEO Meg Whitman avoided calling it afraud, but she said there were "serious accounting improprieties,disclosure failures and outright misrepresentations at AutonomyCorporation PLC."

HP is taking an $8.8 billion charge in its latest quarter,largely to align the accounting value of Autonomy with its real value.It said most of that charge was due to the fictional bookkeeping atAutonomy.

The revelation is another blow for HP, which is struggling to reinvent itself as PC and printer sales shrink.

Amongother things, Autonomy makes search engines that help companies findvital information stored across computer networks. Acquiring it was partof an attempt by HP to strengthen its portfolio of high-value productsand services for corporations and government agencies.

Whitmansaid Autonomy's financial illusion started to unravel after founder andCEO Mike Lynch left on May 23. A senior Autonomy executive thenvolunteered information about the accounting shenanigans, prompting aninternal investigation, she said.

The case has been referred tothe Securities and Exchange Commission and the UK's Serious FraudOffice, she said. The company will try to recoup some of what it paidfor Autonomy through lawsuits.

HP shares dropped $1.45, or 10.9%,to $11.85 in premarket trading. If the shares stay at that level inregular trading, they will set a 10-year low.

HP's net loss forthe fiscal fourth quarter, which ended Oct. 31, amounted to $6.85billion, or $3.49 per share. That compares with net income of $239million, or 12 cents per share, in the same period last year.

Itwas the second mammoth loss in a row for HP. In the third fiscalquarter, it lost a record $8.86 billion, or $4.49 per share. That wasdue to a charge for another acquisition - that of Electronic DataSystems, a technology consulting service that it bought for $13 billionin 2009. In that case, HP didn't blame improper accounting, just resultsthat didn't live up to expectations.

Excluding the charges in thelatest quarter, HP earned $1.16 per share in the latest quarter, justabove the average analyst forecast of $1.14 per share, as polled byFactSet.

HP's revenue was $30.0 billion, down 7% from last year. That was below analyst expectations at $30.5 billion.

HPstuck to its previously given earnings forecast for the fiscal yearthat just started, but it issued a forecast for this quarter that waswell below analyst expectations. It expects earnings, excluding items,to be 68 cents to 71 cents per share, while analysts were looking for 85cents, according to FactSet.