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HP loses $8.9B for the quarter on EDS write-down

updated 06:20 pm EDT, Wed August 22, 2012

PC sales continue to shrink

HP, the world's largest traditional PC maker, reported its second quarter financials today, revealing that the computer manufacturer suffered a loss to the tune of $8.9 billion last quarter. The computer maker's massive loss derived largely from a massive write-down stemming from the purchase of Electronic Data Systems. Despite the quarterly loss, observers believe the company is showing progress in its ongoing effort to transition to an enterprise services focus.

HP's net revenue for the quarter fell five percent to $29.7 billion, slightly below the average investor estimate. The company saw revenues from all of its main business units fall within the quarter, with personal computing revenues dropping 10 percent to $8.6 billion. The Services division dropped three percent to $8.8 billion, though that division is now the company's largest sales generator as of last quarter.

The EDS write-down was expected, as the company revealed earlier this month that it would be taking an $8 billion noncash charge for the acquisition of EDS in 2008. HP bought the firm with the aim of recentering its focus on enterprise services, a more lucrative area than the consumer PC market, which has seen both prices and revenues falling for several years now. HP purchased EDS for $13.9 billion; its write-down for the acquisition was pegged at $10.8 billion. Excluding the write-down, the company earned $1 per share last quarter.

As a part of its reorientation, HP has been reducing its workforce, cutting 4,000 jobs in the fiscal third quarter with a goal of 11,500 by the end of fiscal 2012. Executives, including CEO Meg Whitman, are urging patience as the company cuts costs and moves to right itself.

The focus on enterprise services is of late a common theme among large PC manufacturers, who dominated the past two or three decades of computing only to prove unable to adjust to the recent shift toward mobile devices. Dell yesterday announced disappointing sales in its consumer PC division, and that company too is transitioning toward enterprise services. Consumers are increasingly choosing smartphones and tablets over traditional PC form factors, making Apple the de facto number one computing device manufacturer, while the PC giants struggle to adjust to either adjust to consumer demand or to cede the sector to smaller players.

HP, for its part, is still interested in the consumer tablet sector. While the company has apparently shelved plans for an ARM-based Windows RT tablet, its Windows 8 tablet is still expected to launch this fall.

by MacNN Staff





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