HP warns of huge loss after $8bn EDS writedown

By Sooraj Shah
09 Aug 2012 View Comments
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HP warned investors of a colossal quarterly loss in its third fiscal quarter after writing down $8bn (£5.1bn) on its services arm, of which the majority lies with its $13.9bn (£8.8bn) purchase of IT equipment and services provider EDS in 2008.

The writedown is for what HP has labelled "the impairment of goodwill" within its services arm. This suggests that HP has acknowledged that the tangible but quantifiable value of its services arm has drastically decreased.

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"The impairment review stems from the recent trading values of HP's stock, coupled with market conditions and business trends within the services segment," HP explained in a statement.

The technology giant also announced that it would replace HP enterprise services chief John Visentin with senior VP and general manager of HP enterprise services, Mike Nefkens. According to HP, Visentin will be leaving the company to pursue other interests.

Nefkens will report to CEO Meg Whitman and will be responsible for driving growth and innovation for HP's applications, business processing and outsourcing services, HP said.

Meanwhile, HP's senior vice president and chief financial officer of HP Enterprise Systems Jean-Jacques Charhon has been appointed as HP Enterprise Systems' chief operating officer. He will report directly to Nefkens.

HP has also updated the amount of pre-tax charge it expects to record in Q3 of 2012 from $1bn (£640m) to about $1.7bn (£1bn). The change was in relation to its restructuring programme announced in May.

"The change is primarily driven by a higher than anticipated acceptance rate under its early retirement program and faster than expected implementation of the workforce reduction programme [of 27,000 staff]," HP said in a statement.

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