HP chair and chief executive Carly Fiorina.

The news, which coincided with HP's announcement Monday that its fourth quarter earnings fell short of analysts' estimates, comes on the heels of remarks made by HP chair and chief executive Carly Fiorina two weeks ago that the Calif.-based outfit was rethinking the deal, and its $17 billion to $18 billion price tag, due to volatile market conditions.

"We are disappointed that we have not been able to reach a mutually acceptable agreement to acquire PwC's consulting business," Fiorina said. "We believe the strategic logic underlying this acquisition is compelling. However, given the current market environment, we are no longer confident that we can satisfy our value creation and employee retention objectives -- and I am unwilling to subject the HP organization to the continuing distraction of pursuing this acquisition any further."

"We remain committed to aggressively growing our consulting capabilities, organically and possibly by acquisition, and are open to other business arrangements to achieve our goals," she added.

"It is unfortunate that market conditions caused our discussions to terminate," James J. Schiro, PwC's chief executive, said, commenting on the termination of the talks. "Our priorities continue to be serving our clients effectively, growing our business and providing our people with challenging and rewarding career opportunities."

PwC said it will forge ahead with its previously stated plans to restructure its business. "We remain committed to developing a structure that will allow all our businesses to flourish while maintaining the professional independence and objectivity necessary to ensure healthy capital markets," Schiro said.

Big Five firms, including PwC, have been under pressure by the Securities and Exchange Commission to separate their consulting practices from their accounting businesses in light of concerns over auditor independence.

Earlier news reports cited concerns about the deal among HP investors, who feared that the challenges of integrating a large consulting practice would slow growth, that PwC employees might walk if the deal closed, or that customers might feel like they were being pushed to buy Hewlett-Packard gear, rather than getting independent advice, according to the report.

-- SmartPros News Staff

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