HP reports largest loss in its history

Hewlett-Packard has reported the steepest quarterly loss in its 73-year history, after writing down the value of its 2008 acquisition of IT services company EDS.

The company reported an $8.9 billion loss for the three months 31 July 2012, $8 billion of which stemmed from the write-down. Revenue for the quarter fell 5% year-on-year to $29.7 billion.

Sales all of HP’s business units excluding software continued to slide during the quarter, although CEO Meg Whitman insisted that "the trajectory of the decline flattened".

The steepest decline was seen by the PC division, where sales dropped 10% to $8.6 billion, while services fell 3% to $8.7 billion.

HP recently ejected that head of its services business, John Visentin. "After watching and working closely with the group over the first 9 months, I decided that we were not making progress fast enough in terms of the turnaround and so decided to make a leadership change," said Whitman yesterday.

She said that the company needs to improve the system of accountability in the division. "Somewhere along the line, the basis of accountability with the account leader got diffused across the organisation," said Whitman.

It also needs to focus on higher-margin services, she added. "We need to shift the business mix from some of the low-end services that, frankly, EDS was founded on to where we want to be, which is profitable IT outsourcing, the strategic enterprise services, in cloud, in security, in information optimisation".

Despite an 18% growth in HP’s software division, Whitman said that Autonomy, the UK information management software vendor it acquired last year, "still needs a lot of attention".

"Among the many changes we’ve instituted is a global dashboard to track Autonomy’s pipeline, a single global sales methodology, a single HP services engagement process and a global process to measure client satisfaction and service delivery progress," she explained.

The acquisition was described yesterday as "the worst software acquisition since the dot-com crash" by mergers and acquisitions advisory Magister Advisors.

"Autonomy was a pure software license business, around which HP could have built a much larger solutions business," said MD Victor Basta. "But within literally a few months it is effectively a write-off.  The sheer speed of the decline is down squarely to HP’s failure to execute, and it has wasted a large part of the $13 billion acquisition price already.”

HP also revealed that sales of its mission-critical server range fell 16% year-on-year, thanks in part to its legal dispute with Oracle over support for Intel’s Itanium chips. 

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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