HP's financial report for the third quarter of 2012 shows a net loss of $8.9 billion, the largest in the company's 73-year history. Revenues have dropped by 5% year-on-year, with declining sales across HP's computing, printing and service divisions. Although sales revenue fell short of expectations, the majority of the loss is accounted for by an $8 billion write-down against the much-maligned acquisition of Electronic Data Systems in 2008.
EDS was purchased in 2008 for $13.9bn under the stewardship of CEO Mark Hurd, who was forced to resign in 2010. The deal was part of a series of acquisitions intended to allow HP to take on IT giants IBM and Cisco (PC Mag) but was widely criticised as being far too expensive. These latest financial figures come against the backdrop of HP's restructuring programme which will see it shed 27,000 employees, or 8% of its workforce, by the end of 2014.
Without the write-down and other one-time costs associated with its restructuring, HP's third quarter profit would have been £2bn, a drop of $0.3bn from the same period in 2011. So, although revenue and profits are still heading in the wrong direction, the situation may not be as dire as it first appears.
Meg Whitman, HP President and Chief Executive Officer, remained optimistic about the company's prospects:
"HP is still in the early stages of a multi-year turnaround, and we're making decent progress despite the headwinds. During the quarter we took important steps to focus on strategic priorities, manage costs, drive needed organizational change, and improve the balance sheet. We continue to deliver on what we say we will do." (hp.com)
HP is not alone in struggling to maintain, or increase, sales as Dell also posted disappointing financial results for the previous quarter and Whitman was bullish when speaking about HP’s strategy for moving forward:
"We are under attack by very strong competitive pressures and we are going to respond," she said. "We are going to defend our number-one position in this business." (FT.com)
What does all this mean for the printer division? Revenue in the Imaging and Printing Group was down 3% year-on-year, with consumer hardware revenue down by 13% and sales down by 23%. However, commercial hardware was one of the few areas of the business to see growth, with a 4% increase in sales and revenue. Time will tell if HP has turned the corner but, with the restructuring programme set to last four or five years, it could be a while before the benefits start to become apparent.
by Anthony Morgan