Write downs and restructuring charges of $10.8 billion drove HP's third quarter result deep into the red.
A large chunk of the loss was due to an impairment charge related to the company's acquisition of EDS (technology consulting service Electronic Data Systems) for $13 billion in 2008. in the services segment, which HP adjusted by about $8 billion, as well as another $1 billion related to the Compaq brand. HP also spent about $1.8 billion to lay off and send about 4,000 employees into early retirement (a similar move took place in 2008, while the company decided to buy many former employees back out of retirement, which are now sent into retirement again). The company warned that it may not be done with its write downs and there may be more write downs for the current quarter.
Excluding all one-time charges, HP reported a better than expected net profit of $2.0 billion, which led CEO Meg Whitman to describe the result as an "overall decent quarter". She noted that HP is making progress on its turnaround, but projects the process to take several years.
Revenues in all four major business segments (Personal Systems; Services; Imaging and Printing; Enterprise Servers, Storage and Networking) declined during the quarter. Especially noteworthy are Whitman's comments on the PC market, which she described as "weak". According to the executive, "channel inventory is high across the industry ahead of new product releases," which does not bode well for the company with a vide on Windows 8 and the need to clear out its inventory to sell new systems.
"The reality is we're locked in serious, competitive battles, but we're determined to win," Whitman said. "We will fight to sustain our leadership position, particularly in the Commercial space, while remaining focused on profitable growth. To this end, we are executing targeted marketing and promotional programs to support the business in Q4."
For the current quarter, HP expects revenue to continue to decline.