Hewlett-Packard Co swung to an $8.9 billion quarterly loss as personal
computer sales shrank again and it swallowed a huge write-down linked to
its $13.9 billion purchase of Electronic Data Systems Corp.
The
No.1 personal computer maker, which employs more than 300,000 people
globally, is undergoing a multi-year restructuring aimed at focusing the
sprawling corporation on enterprise services, in the mold of IBM. The
plan calls for reducing its employee base by 8 per cent.
HP will
have gone through about half of its targeted job reductions by the end
of the fiscal year, HP's Chief Financial Officer Cathie Lesjak said in
an interview. It cut 4,000 jobs in fiscal's third quarter and will
likely have shorn 11,500 jobs by end of fiscal 2012, she said.
"HP
is definitely showing progress in terms of turning around the company,"
said Sterne Agee analyst Shaw Wu. "One of the clear signs is a better
predictability of earnings."
The company was plagued by poor forecasting during former Chief Executive Leo Apotheker's brief tenure.
CEO Meg Whitman has urged investors to be patient as she works to jumpstart revenue and cut costs.
"We are still in the early stage of the turnaround. There will be challenges ahead that could create some variability in performance," said Whitman, who replaced the unpopular Apotheker at the helm in September. "But I'm confident in our ability to work through them and get to where we want to be."
The world's largest PC maker posted a
5 percent slide in net revenue in its fiscal third quarter to $29.7
billion, slightly below the average Wall Street estimate of $30.1
billion as compiled by Thomson Reuters I/B/E/S.
It took a charge
of $10.8 billion, mostly related to the writedown of its EDS services
business, which it had announced earlier this month.
HP, which
like smaller rival Dell Inc is struggling to offset faltering PC sales
with services revenue, posted a net loss of $4.49 a share in its fiscal
third quarter that ended July 31, versus a profit $1.9 billion, or 93
cents a share, a year earlier.
Excluding items such as the
writedown, it earned $1 a share, outstripping Wall Street's target of 98
cents. The stock was holding steady at $19.20 in after hours, unchanged
from its close in regular trading on the New York Stock Exchange.
PERSONAL COMPUTERS HIT HARD
The
massive quarterly loss was expected as company said earlier this month
that it would take a noncash charge of $8 billion, primarily writing
down the value of its 2008 acquisition of EDS for $13.9 billion.
HP
has lost close to a quarter of its market value in 2012. Its shares are
down about 15 percent from when Whitman was appointed to the helm in
September of last year.
Revenue from all of HP's main business
units fell, with the personal computer division unsurprisingly recording
the steepest drop of 10 percent, to $8.6 billion.
Services
revenue dipped just 3 percent to $8.8 billion, edging past Personal
Systems Group -- which includes PCs -- to become the company's largest
sales generator in the quarter that ended July 31.
HP's business continued to be hit by a slowing economy in most of its biggest regions, including Western Europe and China.
The
"pretty soft underlying macro economic environment" is continuing into
the current quarter, Lesjak said but added that there were some "bright
spots" such as Eastern Europe and Japan.
In personal computers, HP is facing both a weak consumer market and competitive pricing, Lesjak added.
HP said it expected to earn $4.05 to $4.07 per share for fiscal year 2012, in line with Wall Street expectations.
Copyright Thomson Reuters 2012
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