Hewlett-Packard has seen the largest quarterly loss in company history, announcing a drop of $8.9 billion.
HP was forced to write down the value of assets and book the numbers as a loss in order to reflect the lower value of said assets. This came after a company announcement that it would take a charge of $8 billion to reflect the value of Electronic Data Systems, a consulting service it acquired in 2008 to the tune of $13 billion.
HP also absorbed severance payment charges for the first round of job cuts (27,000 in total) that they’re undergoing as part of a “major restructuring.” By the end of October, the company expects to ditch 11,500 employees – up from the previously announced number of 9,000 layoffs. Through October 2014, the proposed end-date for the restructuring process, another 15,500 employees will be on the outs.
“HP is still in the early stages of a multi-year turnaround, and we’re making decent progress despite the headwinds,” said Meg Whitman, president and chief executive officer.
The “multi-year turnaround” is anticipated to generate about $3 billion in annual savings for the company, but cutting alone won’t put HP on even footing for long. The company has been losing ground to the mobile revolution, with smartphones and tablet computers eating into its core business. Despite still ruling the roost with respect to personal computers, the diminishment of that market stings.
To meet the reduced demand for PCs, HP has elected to move into the technology consulting business – hence the EDS acquisition – and has been looking at options in data storage and high-end servers for corporations and government agencies.
The profitability of these segments has yet to emerge in HP’s numbers and the company’s fiscal performance, thanks in large part to the downturn and in no small part to the fickle market, has beaten the stuffing out of HP stock. It has lost more than half its value over the last two years and it took another punch to the gut after the quarterly loss came to light.
After Wednesday’s conference call, investors bailed on HP stock and shares fell nearly two percent to $18.86. The fiscal third quarter loss puts value at $4.49 per share.
Revenue also sank five percent from last year, marking HP’s fourth consecutive year-over-year quarterly revenue loss.