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Hewlett-Packard Reports $8.9 Billion Loss

Aug. 22, 2012
HP writes down the value of EDS Computer giant also is taking charges on costs related to job cuts More employees taking early retirement than expected

Hewlett-Packard (IW 500/7) on Wednesday announced a quarterly loss of $8.9 billion as the U.S. computer giant was forced to write down the value of some assets and take hefty reorganizational charges.

"HP is still in the early stages of a multiyear turnaround, and we're making decent progress despite the headwinds," said Meg Whitman, president and chief executive officer, in announcing results for the fiscal third quarter.

HP was forced to book a loss under accounting rules, to reflect the lower value of some assets. It had previously announced this would be some $8 billion to mark down the value of EDS, a services group it acquired in 2008.

The Palo Alto, Calif., giant, the world's biggest maker of personal computers, also is taking a charge to cover the costs of cutting some 27,000 jobs, or 8% of its global workforce, by 2014 in a major restructuring.

The move is expected to generate annualized savings of $3 billion to $3.5 billion for HP, which is struggling amid a move to mobile devices and tablet computers.

Earlier this month, HP said more employees than anticipated were taking early retirement and that the cost of the reorganization would rise to between $1.5 billion and $1.7 billion.

Revenues Below Forcecast

The results unveiled Wednesday showed that excluding the hefty charges, the company showed a profit of $1 per share, slightly better than expected, while revenues were below forecasts at $29.7 billion, a year-to-year drop of 5%.

In the same period a year ago, HP posted a profit of $1.9 billion.

Full-Year Earnings Estimate Lowered

HP also lowered its estimate for full-year earnings to between $4.05 and $4.07 per share.

In after-hours trade, HP rose 2.24% to $19.63 on the news, which hinted that the turnaround was on track.

Whitman has vowed to turn the company around after a series of problems including a failed tablet computer and a reversal on plans for its PC unit.

"During the quarter we took important steps to focus on strategic priorities, manage costs, drive needed organizational change and improve the balance sheet," she said Wednesday. "We continue to deliver on what we say we will do."

A former chief executive of eBay and unsuccessful candidate for governor of California, Whitman took the reins at HP in September after her predecessor, Leo Apotheker, was ousted after just 11 months on the job.

Share of Global Market Rises

A recent survey showed HP increased its share of the global market to 17.2% in the past quarter.

But the low-margin PC market has been sputtering amid a sizzling increase in powerful smartphones and the arrival of hot-selling tablet computers such as the iPad.

HP rival Dell said Tuesday profits for its second quarter fell as the U.S. tech firm faced a "challenging" PC market and pursued efforts to shift into areas such as software and cloud computing.

Dell said its net income fell 18% from a year ago to $732 million, and lowered its outlook for full-year earnings.

Copyright Agence France-Presse, 2012

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