HP Writes Off $8 Billion Just on EDS
The goodwill impairment is more than half of the $13.9 billion it paid for EDS
By: Maureen O'Gara
Aug. 10, 2012 06:00 AM
HP said Wednesday that it's going to write off $8 billion because its services business is a flat shambles.
The goodwill impairment is more than half of the $13.9 billion it paid for EDS, which became HP Enterprise Services (ES) in 2008 so HP could look more like IBM.
It's also changing ES' leadership. John Visentin, who was put in charge by Léo Apotheker, HP's last failed CEO, is leaving to "pursue other interests" and is being replaced on an acting basis by the current head of ES EMEA Mike Nefkens, who will report directly to HP's current CEO Meg Whitman, who's counting on fewer, more profitable deals. She has said the EC turnaround could take a while (translation: years).
JJ Charhon, who's been the unit's CFO, will now be its COO in hopes he can increase customer satisfaction and improve service delivery efficiency.
Because people are grabbing early retirement and bailing out of HP faster than anticipated, the company was able to increase its third fiscal quarter guidance a tad. It said it expects non-GAAP EPS to be $1, up from 94 cents-97 cents.
HP blamed the $8 billion impairment on "the recent trading values of HP's stock, coupled with market conditions and business trends within the Services segment." HP's stock of course is in the tank down something like 60% since it bought EDS.
On top of the EDS write-off, HP will be taking a restructuring charge of $1.5 billion-$1.7 billion to cover departures, up from the $1 billion forecast.
Because of all the write-offs HP figures it will lose $4.31-$4.49 a share GAAP in the quarter that ended in July. It did not provide an updated outlook for the full fiscal year.
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