Hewlett-Packard settles largest-ever stock options backdating lawsuit

When Hewlett-Packard Co. (NYSE: HPQ) bought Mercury Interactive a little over a year ago, the company probably did not know that a pretty large settlement would be forthcoming from several pension funds that accused the now-subsidiary of stock-option backdating. The settlement reached earlier this week was $117.5 million, the largest of its kind.

The second-largest out-of-court settlement due to accusatory stock options backdating was $18 million, so the Mercury case seems unique: why such a large settlement here? HP knew of the shenanigans when it purchased the company in 2006, although the extent was probably unknown at the time. Even with the $4.5 billion purchase price and the $117.5 million settlement, Mercury was still a wise investment for HP moving forward, as it's already become a lucrative area within the company.

HP wants this situation and settlement to quickly be swept under the rug, which is no surprise. HP is shining these days under operational CEO Mark Hurd and from all appearances, can do little (or no) wrong on its march to continue crushing sales numbers and margins from competitors like IBM Corp. (NYSE: IBM) and Dell, Inc. (NASDAQ: DELL). Oddly, the company has done an admirable job of taking focus away from the corporate spying situation from a year ago and other problems by using its core business strengths to perform very well quarter to quarter.