If HP investors were expecting Meg Whitman to produce a miracle at HP and turn the company around in 12 months, then last night’s earnings call will have disappointed. The hardware-software giant announced a Q3 loss of US$ 8.9 billion -- its biggest quarterly loss in its history with Autonomy dragging on an already poor performance for hardware sales.
HP Job Losses, Write-downs
However, Whitman insists that everything is on track and that what we’re seeing at the moment is the early stages of a turnaround that will see HP back where it belongs in the long term. She warned, though, that it wouldn’t be easy, a fact the 4000 people that lost their jobs in restructuring over the past year will testify to.
Before looking at the information that was given about the performance of its US$ 11.7 billion acquisition last year, let’s take a quick look at some of the figures.
In a pretty weak global economy, HP hasn’t done as well as some of its counterparts, who have also been suffering from weak demand, but have still been able to push the bottom line in the right direction.
The month started badly enough for investors when earlier on HP announced that it would be posting a bigger-than expected charge in the third quarter in relation to its workforce reduction plans. The idea is that 27,000 people worldwide would go, and with four thousand gone over the year, the costs of this look pretty steep, although figures on this are not available.
A further 11,500 are expected to leave the company in fiscal year 2012 -- which ends at the end of October -- as opposed to the 9,000 that HP had originally announced. Another 15,500 employees will be let go through October 2014.
Also in this quarter -- and the reason behind the US$ $8.9 billion loss it announced for the quarter -- are the plans announced to take an $8 billion charge to reflect the shrinking value of Electronic Data Systems, a technology consulting service it bought for US$ 13 billion in 2008.
Overall, revenue for the third quarter fell 5 percent year over year to US$ 29.7 billion, US $500 million less than analysts had expected. Without the write-downs and other once-off costs, though, HP did OK in a very sluggish market.
Profits without these costs would have been US$ 1.97 billion, down 9 percent year over year, but in keeping with what’s happening in the wider global market as businesses in many geographies hold off on spending until the direction of the global economy finally becomes clear.
Another highlight was that software sales rose 18 percent to $973 million, driven by last year's acquisition of Autonomy, even if licenses grew by only 2%. Software-related support revenue was up 16 percent and software services rose 65 percent.
The PC market also remains weak, with PC revenue down 10% year-over-year, driven by this weakness and an aggressive pricing from competitors, Whitman said. She added: