Shares in Hewlett-Packard (HP) dropped heavily yesterday morning on renewed concern over the quality of the computer-maker's accounting. HP's financial reporting had already become the focus of stock market interest last month when it changed the way it allocated costs between its various divisions.

In the latest twist, the company - which employs around 2,000 people in Dublin - revealed in a filing with the Securities and Exchange Commission that it had made a mistake by including investment gains in its operating cashflow. Reversing that mistake, the company said $144 million (€133.7 million) of the operating cashflow it reported in its most recent quarter, which ended in January, should have been classified as cashflow from investments. The adjustment cut HP's operating cashflow by 18 per cent, to $647 million, compared with the $1.72 billion it reported a year before.

Mr Steve Milunovich, the Merrill Lynch technology analyst who was among the first to unearth the HP restatement, said in a note to investors that he regarded the earlier misstatement as "an honest mistake". He added, though, that "the timing is bad given investor jitters over segment accounting changes" that the firm revealed last month.

The company's shares dropped by nearly 7 per cent in morning trading in New York, erasing more of the gains that were achieved during a powerful rally last autumn. - (Financial Times Service)