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Hewlett-Packard is to take an $8bn writedown related to its services business following poor trading at the division.
The services division comprises mainly the former EDS business, which the US technology group bought for almost $14bn in 2008. Pre-tax profits at this division had fallen 27 per cent year on year in the second quarter and Meg Whitman, chief executive of HP, had indicated that she wanted to revamp the operation to focus on fewer, higher-margin contracts.
HP, which is cutting jobs and restructuring in an effort to revive its flagging fortunes, said falls in the company’s share price had prompted it to review the value of its assets.
The company said: “The impairment review stems from the recent trading values of HP’s stock, coupled with market conditions and business trends within the services segment.”
Peter Misek, analyst at Jefferies, said: “I am not surprised that HP had a writedown, but I am surprised at the magnitude of it.”
HP also said it expected to take a pre-tax charge of $1.5bn-$1.7bn in the third quarter related to its redundancy programme. This raised its previous estimate of approximately $1bn, as larger numbers of staff than expected are opting to take the company’s early retirement package. HP is cutting about 27,000 jobs.
HP has also appointed Mike Nefkens, currently senior vice-president and general manager of the services business, as acting head of the division. He replaces John Visentin, who has left the company.
Excluding the writedowns, HP forecast third-quarter fiscal 2012 non-GAAP earnings per share of $1, up from a previous range of $0.94-$0.97.