HP Posts Largest Ever Loss After Huge Writedown
HP has posted the biggest loss in its 73-year history as it struggles to transform its personal systems and service units
The scale of the challenge facing the management at Hewlett-Packard has become clear after the company posted a dire set of third quarter financial results.
HP has always put a heavy emphasis on selling servers, personal computers, printers and other IT hardware as competitors have moved away from those items. And the latest figures show it continues to feel the pressure for maintaining this strategy.
Massive Loss
Whether that pressure lessens or increases in the next few quarters is something only time will tell, but at the moment those businesses and HP’s enterprise services division are the two top turnaround targets for CEO Meg Whitman and COO Cathy Lesjack.
The huge IT company 22 August reported that its earnings and sales continued to falter in Q3 2012 as the company just did meet Wall Street’s projections. HP’s profit was $2 billion/£1.2bn ($1 per share), which amounted to a 9 percent drop from the same period a year ago. Revenue fell 5 percent year-over-year to $29.7 billion (£18.7bn).
However, these numbers were predicated on an $9.2 billion (£5.8bn) write-down on its enterprise services business. This was largely the result of a previously announced $8 billion (£5bn) write-down for the 2008 acquisition of Texas-based services firm Electronic Data Systems Corp. and separate restructuring charges.
Including the $9.2 billion charge, HP’s quarter represented the biggest loss in the company’s 73-year history.
Minus the charge, the company’s results were pretty much on target for investment community expectations. Analysts queried by Thomson Reuters expected the company to earn 98 cents per share on sales of $30.1 billion (£18.9bn).
Storage Saviour?
Storage, in the form of the 3PAR with its StoreOnce product line, was the biggest winner in the HP sales lineup, with sales up 60 percent year over year. The company’s enterprise networking switches and routers also reported growth with a 10 percent sales improvement over Q3 2011.
HP didn’t give specific numbers on revenue for its new cloud software and services lineup, but Whitman said that the HP Cloud System recently signed its 750th customer and is making strong inroads in the airlines vertical.
The Personal Systems Group, comprised mostly of the former Compaq franchise, made $8.6 billion (£5.4bn) but was down $972 million (£611m) from a year ago. Enterprise Services, which is largely what once was EDS, brought in $8.7 billion (£5.5bn) but lost $276 million (£174m) year over year.
IPG, HP’s printing franchise, held steady at $6 billion (£3.8bn) in revenue.
The Palo Alto, Calif.-based company, which is still the world’s No. 1 PC maker ahead of Lenovo and Dell, also said that it has cut its earnings outlook for the full fiscal year to a range of $4.05 (£2.54) to $4.07 (£2.56) per share.
‘Under Attack’
“We are under attack from several sides,” Whitman said on the conference call, “with macroeconomic headwinds and some very aggressive pricing from competitors in personal systems. But we are going to fight and defend our No. 1 market position with a new lineup of PCs and a Windows 8 tablet for enterprises that we will be introducing soon.”
HP’s stock was both up and down 22 August. Shares jumped 4 percent in after-hours trading, slipped back about 1 percent, and then turned back up 1.4 at around 1:30 pm PT. It was selling at $19.20 (£12.08) at 3 pm PT.
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