HP posts loss after EDS writedown

HP's quarterly revenue has taken a severe hit and recorded a loss of $8.9 bn. The company's sales of personal computers shrank again and it swallowed a huge writedown linked to its $13.9 bn purchase of Electronic Data Systems Corp.

According to the reports, the company reduced its full- year earnings outlook slightly to the lower end of its previous range as company's business continued to be hit by a slowing economy in most of its biggest regions, including Western Europe and China.

Due to this, revenue from all of the HP's main business units fell with the personal computer division unsurprisingly recording the steepest drop of 10%, to $8.6 bn whereas services revenue dipped just 3% to $8.8 bn, edging past personal systems group-which includes PCs-to become the company's largest sales generator in the quarter that ended 31 July.

The company posted a 5% slide in net revenue in its fiscal third quarter to $29.7 bn. It took a charge of $10.8 bn, mostly related to the writedown of its EDS services business.HP is struggling to countervail its fluctuating PC sales with services revenue and posted a net loss of $4.49 a share in its fiscal third quarter that ended 31 July, compared with a profit $1.9 bn, or 93 cents a share, a year earlier.

The effect of this can be seen in NYSE where the company's stock fell to $18.35, down 4.4% from its $19.20 close in regular trading.

HP said it expected to earn $4.05 to $4.07 per share for fiscal year 2012. HP's previous full-year estimate was $4.05 to $4.10.
Decrease in PC sales has not only impacted the revenue side of the company but also its headcount.

The company which employs more than 300,000 people globally is now undergoing a multi-year restructuring which is aimed at focusing the sprawling corporation on enterprise services, following the footprint of IBM. The plan calls for reducing its employee base by 8%.

Under the umbrella of new strategies, HP is revamping its enterprise services unit, which caters to corporations. The company is also changing the leadership structure in the unit to bring more accountability and moving away from offering low-end services, an area that EDS specializes in.