HP to Report Quarterly Loss of Over $8 billionBy: Sean Patterson - August 8, 2012
HP hinted today that it expects to report the third quarter of 2012 as its largest-ever quarterly loss. The losses, which total more than $8 billion, are the affect of a restructuring program and a services goodwill impairment charge of around $8 billion.
The $8 billion charge stems from the acquisition of IT services company Electronic Data Systems (EDS). When HP acquired EDS in 2008, it paid $13.9 billion for the company. HP added billions of dollars worth of goodwill to its ledgers as a result of the deal. Goodwill, in accounting terms is the value a company has beyond the value of its assets. The value of EDS has not held, and HP has been forced to take an $8 billion hit in value.
As for HP’s massive restructuring, the costs of that program will run the company a pre-tax charge of $1.5 to $1.7 billion. The company states that costs stem from “a higher than anticipated acceptance rate under its early retirement program and faster than expected implementation of the workforce reduction program.”
Among this financial news, HP also announced changes to its senior management. HP will be replacing John Visentin, the head of HP’s Enterprise Services division with HP Enterprise Services General Manager Mike Nefkens, who will head the division on an acting basis. HP Enterprise Services Chief Financial Officer Jean-Jacque Carhon was also appointed to the role of of COO for the Enterprise Services division.
Hardware manufacturers may face more challenges in the future, as software makers begin to sell their own hardware. Emulating the success of the Apple ecosystem, Google has begun selling its Nexus line of devices, and Microsoft announced its own laptop/tablet hybrid Surface.