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The SEC's probe was first reported by the Wall Street Journal, which cited anonymous sources as saying the Securities and Exchange Commission was investigating claims that Hurd shared inside information with an ex-contractor ahead of its $13.9 billion acquisition of Electronic Data Systems in 2008.

Hurd's departure in August stunned investors and sent shares tumbling 8 percent in the first trading day after the announcement. Now an Oracle co-president, he left under a cloud of sexual harassment accusations, although the board found no evidence to back up that allegation.

HP instead accused Hurd of filing inaccurate expense reports to conceal a "close personal relationship" with a former contractor, although Hurd's representatives have disputed that.

Now, the government was also examining the claims of inaccurate expense reports filed by Hurd at HP, and looking into whether Hurd destroyed computer evidence related to his departure, the Journal reported.

HP confirmed the SEC probe but declined to comment on what the government was specifically investigating. Hurd declined comment through a spokesman.

"HP is cooperating fully with the SEC on its investigation," a spokeswoman for the technology giant said.

Oracle declined comment. The SEC also would not comment.

Jodie Fisher, the contractor at the center of the controversy that led to Hurd's ouster on August 6, alleged in a June 24 letter that Hurd divulged details about HP's plans to acquire EDS before the deal was announced, a source said last month.

At that time, Hurd's representatives denied the allegations, which were contained in the same letter in which Fisher accused Hurd of harassment.

(Reporting by Gabriel Madway; Editing by Gary Hill)

Its shares surged more than 7 percent after-hours.

The world's biggest maker of design software forecast on Monday that it will post current-quarter profit, excluding items, of 54 to 59 cents a share, beating the average analyst forecast of 51 cents, according to Thomson Reuters I/B/E/S. It also projected revenue of $1 billion to $1.05 billion, ahead of the average forecast of $992 million.

That forecast marked a sharp contrast to one issued three months ago when problems in key markets in Japan and the U.S. educational sector caused Adobe to warn that revenue would fall short of Wall Street expectations. As a result, investors had been anxious about the forecast for the first quarter, issued on Monday.

The company also posted a profit, excluding items, of 56 cents per share for the fourth quarter, which ended December 3. That beat the average forecast of 52 cents. Quarterly revenue of $1.0 billion beat the average forecast of $988 million.

Global Equities Research analyst Trip Chowdhry said that Adobe had been too conservative in its previous forecast, issued in September, because executives were spooked by tough economic conditions.

"Overall, the economy has improved a lot since then," Chowdhry said.

Still, sales at Adobe's creative solutions business, which includes its flagship software package Creative Suite 5, declined to $542 million in the fourth quarter from $550 million in the third quarter. The software maker had forecast this would happen, blaming economic weakness that hurt sales in Japan and to educational customers in the United States.

CS5 is a collection of more than a dozen programs for editing photos, videos and sound, creating interactive websites and designing print publications. The package, which was released last spring, includes Photoshop, Illustrator and Dreamweaver.

Adobe charges from $1,899 to $2,599 for CS5, or $599 to $899 to upgrade from an earlier version.

Shares of Adobe closed at $29.18 on the Nasdaq and surged 7.2 percent to $31.30 in extended trading.

(Reporting by Jim Finkle, editing by Matthew Lewis)

Trading was expected to be subdued, however, ahead of year-end holidays and following strong gains earlier this month.

The S&P 500 .SPX held on to a two-year high on Friday, having rallied over 5 percent so far in December.

Some nerves were rattled by possible escalating tensions in the Korean peninsula after South Korea held live firing drills in a disputed area despite threats of war from Pyongyang.

Investors are expected to focus on fourth-quarter financial results from Adobe (ADBE.O), with analysts expecting the software firm to post earnings per share (EPS) of $0.52, compared to $0.39 a year ago.

In company news, Chevron (CVX.N) said on Monday it had suspended production from an oil pipeline in Nigeria's Delta state, which was breached on Friday.

Genzyme Corp (GENZ.O), which is fighting against an $18.5 billion bid from Sanofi-Aventis SA (SASY.PA), will on Monday take another stab at persuading investors that its experimental multiple sclerosis drug is worth more than Sanofi's projections.

Food and beverage company Sara Lee Corp (SLE.N) has been in talks to sell itself to Brazilian meat producer JBS (JBSS3.SA), but the pair are at odds over price and it is unclear if a deal can be reached, a source familiar with the situation said on Sunday.

Google Inc (GOOG.O) has asked some manufacturers to delay the launch of TV sets based on the internet company's software, the Wall Street Journal said, citing people briefed on the company's plans.

Web commerce company eBay Inc (EBAY.O) said it is to buy brands4friends, Germany's largest online shopping club, for about $200 million (150 million euros) to strengthen its position in Europe.

On the macroeconomic front, the Obama administration will be better positioned to fight the extension of tax cuts for the wealthiest Americans when they are set to expire in two years, U.S. Vice President Joe Biden said on Sunday.

In European equity markets, the FTSEurofirst 300 .FTEU3 rose 0.4 percent in early trade, with energy shares supported by firmer crude prices as the cold weather in Europe and parts of the U.S. boosted demand expectations for heating fuel. .EU

The European Central Bank (ECB) expressed "serious concerns" that Ireland's bailout package could affect the institution's liquidity operations in the euro zone, while the central bank's president Jean-Claude Trichet said Dublin needed to stick "rigorously" to the rescue plan.

(Reporting by Harpreet Bhal; Editing by Greg Mahlich)

Genzyme, a U.S.-based biotech company that makes drugs for rare diseases, maintains that Campath, a drug it is testing for multiple sclerosis, could generate peak annual sales of $3.5 billion. It aims to strengthen that argument at an investor meeting in New York on Monday.

France's Sanofi sees peak annual sales closer to $700 million. The discrepancy is central to Genzyme's argument that it is worth more than the $69 a share being offered by Sanofi.

To break the deadlock, Genzyme and Sanofi advisers have discussed using contingent value rights (CVR) in a potential deal structure. The rights would give Genzyme investors an extra payout if the drug reached certain targets.

"I think that's the way it's going to go," said William Tanner, an analyst at Lazard Capital Markets, "I imagine there will be a figure in the low $70s with an earn-out based on how this drug actually does."

Few analysts believe the drug, which is already sold as a cancer treatment and known generically as alemtuzumab, will generate the kind of sales projected by Genzyme. Independent market research group BioMedTracker has forecast Campath sales of about $1.6 billion in 2019.

Nonetheless, the company is expected to cite conclusions from a consulting firm which canvassed hundreds of physicians and payors worldwide who estimated the drug could generate sales of about $3 billion.

A COMPLICATED DEAL

Genzyme first presented its argument at an investor event in New York two months ago. At the time, it forecast 2011 earnings of $4.30 to $4.60 a share and said Sanofi's offer was not based on up-to-date information.

Analysts had on average been expecting 2011 earnings of $3.57 a share. Sanofi's offer represented a multiple of just over 19 times that estimate.

Applying the same multiple to its own forecast, Genzyme said Sanofi would need to pay $89 a share -- a figure Sanofi dismissed as "totally unrealistic."

Investors and analysts had said a deal could be reached within a range of $75 to $80 per share.

But executing a deal involving CVR would be complicated and time-consuming. Shareholders would be unlikely to accept it unless Sanofi also increased its cash offer.

"They have to sweeten the underlying price," said Geoffrey Porges, an analyst at Sanford Bernstein. "If they sweeten the current price, a CVR could be a little extra to get a deal over the line."

Even if a CVR price were agreed, investors would likely discount it to a greater or lesser extent.

The euro slipped to a two-week low after last week's massive five-notch credit rating downgrade of Ireland by Moody's and euro zone leaders failed to reassure markets on how they will tackle the debt crisis in the short term.

With the year-end holidays looming, buyers were hard to be found, having taken profits since Asian stocks hit 2- year highs last week.

Asia Pacific stocks, as measured by MSCI .MIAP00000PUS fell 0.5 percent, having earlier dropped to lows not seen since December 8, while the index excluding Japan .MIAPJ0000PUS shed 0.8 percent.

Despite threats of war by Pyongyang, South Korea on Monday launched live firing drills on a disputed island after an emergency U.N. Security Council meeting failed to agree on how to defuse the crisis.

Share markets from Australia to Singapore were all in the red with Japan's Nikkei .N225 down 0.8 percent, Hong Kong's Hang Seng index down 1.0 percent and South Korea's KOSPI .KS11 0.7 percent lower. Shanghai's stock index .SSEC fell 1.8 percent, having earlier slid about 3 percent.

"We see a typical year-end money crunch plus jitters over continued PBOC tightening and consequently a lackluster market performance until early next year," said Shanghai Securities senior trader Zheng Weigang.

Technically, the fall in the Shanghai Composite Index to below its 250-day moving average indicates the market may struggle in the near term.

Even major miners like BHP Billiton (BHP.AX) erased gains to close lower on the day as support from higher commodity prices faded.

Copper, which came within a whisker of the record high on the London Metal Exchange, was last up 0.9 percent at $9,145 a tonne. Earlier, it rose as high as $9,257.50, not far off the record high of $9,267.50 set last week.

U.S. crude was flat near $88 a barrel.

Analysts generally expect strong growth in emerging economies to keep commodities in demand next year. JPMorgan forecasts a 17 percent return for the S&P commodities index, or the GSCI .SPGSCI, over the next 12 months.

Despite the negative start to the week, MSCI's Asia Pacific stock index is still up some 10 percent so far this year, compared with a rise of around 8 percent for the MSCI world equity index .MIWD00000PUS.

JPMorgan predicts emerging markets equities will provide some of the best returns next year among global stocks. It forecasts the MSCI emerging markets stock index will rise to 1,500 in 2011 from around 1,108 currently .MSCIEF.

EURO SAGS

KKR made an indicative bid of A$38 to A$40 per Perpetual share in October, eyeing a slice of the $1.2 trillion Australian wealth management sector. It was only willing to raise that slightly after looking at limited data, sources said earlier this month.

The Australian wealth management industry is among the few growing parts of the country's financial services sector, thanks to compulsory private pension schemes leading to several deals including the latest $13 billion takeover offer of AXA Asia Pacific (AXA.AX) by AMP (AMP.AX).

Perpetual, founded in 1885, called the initial offer low and said it would now end all discussions with KKR after it failed to get an acceptable price.

A successful offer could have led to further consolidation in the world's fourth-largest wealth management industry but investors said KKR will likely remain in the market for other Australian wealth management assets.

KKR's offer valued Perpetual at about 22 times forward earnings compared to 18 times for AMP's offer for Australia and New Zealand assets of AXA Asia Pacific.

"The takeover premium is gone out of the share price and no other bidders are likely to come in," said Simon Burge, fund manager at ATI Asset Management. "Add to that uncertainty over the new CEO. Only when a new head is appointed will we know the direction of the firm."

Perpetual has been looking for a new chief executive since David Deverall decided to quit in June after seven years at the helm. Perpetual did not give a reason for his decision but said Deverall will stay on till a replacement is found or at least till March 2011.

The company said it was still in the process of selecting a new chief executive.

SHARES FALL MOST IN TWO YEARS

Perpetual, which has a huge retail shareholder base of up to 70 percent, saw its shares jump by a fifth since the KKR bid and the stock ended at A$37.01 on Friday, valuing the firm at A$1.63 billion.

The stock closed at the day's low, dropping 14.8 percent to A$31.54, a level just above where it was trading before KKR's offer. The fall also marked it worst daily decline since Oct 29, 2008.

"The Board confirms that KKR will not be conducting any due diligence on Perpetual and does not anticipate any further discussions with KKR in relation to the proposal," Perpetual said in a statement.

KKR said it had been unable to arrive at a mutually acceptable agreement with Perpetual but had been satisfied with the level of access and information received.

For KKR, Perpetual adds to its lost bids in Australia, where PE firms have also been hurt by a tax ruling that says gains from asset sales by PE firms will be taxed as income.