“Hewlett-Packard Co. on Wednesday said that it will take a massive charge against its earnings for the latest quarter, leading to a record loss of nearly $9 billion,” The Associated Press reports. “The charge is the result of a writedown of the value of its services business, reflecting that the company overpaid for when it bought Electronic Data Systems in 2008 for $14 billion. HP said it will take an $8 billion charge for the reduced value of Enterprise Services in the quarter that ended in July. The division, which provides information technology and outsourcing services to corporations, has seen flat revenue for the last two years, and its operating profit has declined.”
AP reports, “The Palo Alto, Calif. company said the charge and other accounting adjustments will lead to a loss of $4.31 to $4.49 per share. That works out to about $8.5 billion to $8.9 billion. In the last 15 years, HP has only posted one quarterly loss. The charge comes as CEO Meg Whitman is trying to turn HP around. The company’s main businesses, PCs, services and printers, are stagnant or shrinking. Whitman, the former CEO of eBay, took over in September… The restructuring, announced in May, is expected to slash 27,000 jobs, or 8 percent of HP’s work force, by 2014. It’s the largest downsizing in the company’s history.”
“The computer company also said the head of Enterprise Services, its second-largest division, is leaving ‘to pursue other interests,'” AP reports. “John Visentin will be replaced on an interim basis by Mike Nefkens, currently the head of Enterprise Services in Europe, the Middle East and Africa.”
Read more in the full article here.
MacDailyNews Take: First the leeches die, then the host. Sleep tight, Balmy.
When we were an agrarian nation, all cars were trucks because that’s what you needed on the farms. Cars became more popular as cities rose, and things like power steering and automatic transmission became popular. PCs are going to be like trucks. They are still going to be around. However, only one out of x people will need them. The move will make many PC veterans uneasy because the PC has taken us a long ways. We like to talk about the post-PC era, but when it really starts to happen, it’s uncomfortable. – Steve Jobs, June 1, 2010
Death is very likely the single best invention of life. It is life’s change agent. It clears out the old to make way for the new. Steve Jobs, June 12, 2005
[Thanks to MacDailyNews Readers “Fred Mertz” and “Lynn Weiler” for the heads up.]
Related articles:
The Windows PC sure looks like it’s dying – August 7, 2012
Why Apple will crush Microsoft in the Post-PC era – March 13, 2012
Nothing good about 27,000 people losing work. I wonder how much Whitman makes?
Her salary is nothing, but her bonuses are supposedly $2-6 million. Unfortunately, the scale of HP’s fiscal situation makes her compensation nearly irrelevant in the grand scheme.
Let’s be generous and say she’ll make $10M… Even if she donated her time and expertise and made nothing, at an average of $80k/employee, her salary would save only about 125 jobs. Out of 27,000.
So, it really doesn’t matter what she makes – in any context, really, unless perhaps you’re a shareholder and you’re not happy with the value.
This is why it’s silly when people wring their hands about executive compensation. When a company is big (as they often are when executives receive large compensation packages), the numbers are so huge, the compensation is a tiny drop in the bucket, and has very little bearing on anything.
I disagree. Workers’ wages have risen very little in relation to executives’ in the last several decades yet very few companies grew their value enough to justify the ridiculous salaries. CEO’s sit on each others’ boards and award themselves fat pay and benefits. Don’t try to paint me as a “socialist.” I believe smart CEO’s with good business sense should be compensated well… based on the company’s performance and based on a reasonable ratio of what employees make. See here: http://articles.latimes.com/2012/may/02/business/la-fi-mo-us-ceo-pay-231-times-more-than-average-workers-20120502
I don’t disagree that in many cases, executive compensation is out of line. But, to discuss it in the context of workers’ pay, as if the two have any correlation is stupid at best. It isn’t an “out of their pocket and into his” thing.
When a company has thousands of workers, it doesn’t matter if the CEO makes $1 million or $10 million! For a company the size of HP or Apple, you could take ALL the CEO’s pay and GIVE it to the rest of the company, and they wouldn’t have enough to buy a nice dinner out with!
HP Has 350,000 employees. What the hell difference does it make whether she makes 60 times what the average employee makes or only 20 times what the average employee makes? I’ll tell you. We’re talking about the difference between $20 per employee or $6 per employee. Ooohhh… I’m sure that extra $1/month is really killing the employees’ morale to pay the CEO!
Like I said, it’s a drop in the bucket! If you want to get upset about it on principle because you’re a share holder, fine. But, it’s moronic to think it has any significant impact on worker pay.
It makes a difference to each and every one of those 350,000 employees when their CEOs make excessive amounts of money whilst said employees are slowly but surely driven out of a job!
Really? You’re gonna make him go through all that bullshit again?
He doesn’t get it, just like Spock. It’s illogical to raise the disparity between the CEO’s performance money and the shitty way the company is performing.
ecrabbs suffers from inverse cognitive dissonance, wherein it makes perfect sense to pay these people astronomical sums of money that results in massive layoffs, but ecrabbs fails to see any connection.
Their kind of belief system supports the notion that the CEO is not a “worker” but a demigod who walks on water, but can’t save my job.
“But, to discuss it in the context of workers’ pay, as if the two have any correlation is stupid at best.”
Stupid at best. No wiggle room. Just stupid thinking and moronic, huh?
Personally, I think you’ve jumped the shark trying to make your point.
ecrabbs. There’s an ointment for that.
As long as Apple and some other innovative companies can help offset the loss of HP, Dell, Microsoft, et al, we will be ok but I don’t have a lot of faith in the “other” companies. Things are going to get much worse in the short term as we move to a more urban (mobile) space.
HP will be just fine:
(I make no apologies for my love of The Onion)
The first seven lines of lyrics to The End by the Doors.
$9B and 27K souls. Wonder how many CEO replacements before the end. They are caught in the river Styx rapids now.
Keep in mind that most of this “loss” is a paper loss. The money was spent a long time ago. I’d be more concerned about falling PC sales than this one-quarter blip if I were an investor.
“Nothing good about 27,000 people losing work. I wonder how much Whitman makes?”
If she can turn HP around and save the other 310,000 jobs, she’s worth twice what they are currently paying her.
Seems to me that CEOs (and their ilk) should be paid their ridiculous amounts of money AFTER they actually earn it (turn their company around, etc); until then, a more reasonable salary should be paid.
“Keep in mind that most of this “loss” is a paper loss. The money was spent a long time ago. I’d be more concerned about falling PC sales than this one-quarter blip if I were an investor.”
Hopefully HP didn’t take on debt to make these acquisitions. If they did, then HP is in deep doodoo, because the write down was precipitated by the acquisitions not performing. That means no cash flow coming from them.
Jeez, I remember reading about that EDS acquisition. The analyst consensus at the time was that HP had vastly verpaid for EDS. And, now, we see the hard evidence.
I don’t know if it’s so simple as saying HP overpaid for EDS. Acquisitions are always done with the hope that 1+1=3, due to synergies. The reality is often 1+1=1.5. Envisioned synergies don’t happen. Key personnel leave. Etc., etc., etc.
This is very sad…
The death of a once powerful icon…
Agree. I have little sympathy for MS, which I feel has been ethics-deficient almost from its inception, but my perception of HP was vastly different. It’s founders seemed driven not just by a love of engineering and technology, but by a values-conscious mindset that produced great products while serving all their stakeholders – shareholders, employees and customers. That’s a tough juggling act, and I guess no company can do it forever.
Weird.
No mention of when HP bought PALM and bet on the absolutely certain future success of Web OS, and its assured decimation of Apple iOS.
http://www.pcworld.com/article/195178/hp_buys_palm_why_its_a_good_deal.html
Remember this one?:
‘…HP exec, Eric Cador, claims his company’s TouchPad will become better than number one: “… in the tablet world we’re going to become better than number one. We call it number one plus.”’
Now what PC fanboi clown was it who said earlier this year he couldn’t understand all the fuss over the performance of Apple when HP were looking so strong, going forward.
Yeah right.
HP looses – what? – 9 billion – what happens? The share goes down a half percent (and it has some time left of the day to recover or even go to green). Apple announces a result better than its own sensible forecast and still juggernauting – AAPL tanks! Go figure?
I can explain why: They lost my company as a customer. Last year and this year we spent 100,000 Euro each for Apple hardware alone after we gladly switched platform. And I know a lot of companies like us.
Considering this is on top of whatever their $1.2bn payout for Palm and their $2.7bn payout for 3Com have cost them this really is not the way to run a business. However, you can’t blame Whitman. Hurd and Apotheker are the people that threw the money around in all directions.
HP needs to learn to focus again or it is history.