HP set for huge services loss

By Kevin McLaughlin on Aug 9, 2012 7:49 AM
Filed under Services

Big charge from EDS buy.

HP expects to write down $US8 billion ($A7.5bn) from its services division during its fiscal third quarter, a move that stems from its $US13.9 billion acquisition of EDS in 2008.

In HP's second quarter, services division revenue dropped 1 percent year over year with an 11.3 percent operating margin.

EDS, renamed HP Enterprise Services in 2009, was led by longtime HP executive Ann Livermore until her ouster last June. Last May, ex-CEO Leo Apotheker moved Technology Services out of Enterprise Services and into HP's Enterprise Servers, Storage and Networking division.

HP is also expecting higher-than-anticipated costs for its planned restructuring, which will include the slashing of 27,000 jobs -- about 8 percent of its workforce -- by the end of its fiscal 2013 year next June.

HP now expects its restructuring to result in a third-quarter charge of between $US1.5 billion and $US1.7 billion, up from its earlier forecast of $US1 billion, due to the unexpected popularity of its early retirement program and "faster than expected implementation of the workforce reduction program."

HP bumped up its third-quarter earnings forecast from 94 cents to 97 cents per share to $US1 per share, but did not update its full-year fiscal 2012 guidance. HP shares went up nearly 3 percent to $US19.70 in Wednesday trading.

However, HP shares are down more than 23 percent this year.

Meanwhile, the status of Autonomy, another major HP acquisition, remains unclear as it pertains to sales through the HP channel. HP closed its $US10.3 billion acquisition of the U.K.-based information management software vendor last October, but the vast majority of HP partners are still not being permitted to sell Autonomy products.

Services chief departs

HP also announced that John Visentin, who last August replaced the retiring Tom Iaonotti as head HP of Enterprise Services, is leaving the company "to pursue other interests."

Mike Nefkens, the London-based senior vice president and general manager of the EMEA branch of HP Enterprise Services, will replace Visentin on an acting basis, HP said.

HP also named Jean-Jacques Charhon, senior vice president and CFO of HP Enterprise Services, as COO of the division. He will be tasked with "increasing customer satisfaction and improving service delivery efficiency," HP said in a statement.

This article originally appeared at crn.com

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HP set for huge services loss
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