Hewlett-Packard is to write down the value of its IT services business by $8 billion this quarter, the company has warned investors.
The goodwill impairment is based on the performance of HP’s shares – i.e. the market believes HP’s business is worth less than it did – and the state of the IT services industry as a whole. HP’s services business was built on its 2008 acquisition of EDS, for which it paid $13.8 billion.
HP also ousted John Visentin, executive vice president and general manager of HP Enterprise Services. He will be replaced on a temporary basis by Mike Nefkins, who leads HP Enterprises Services in EMEA.
The company also warned of higher restructuring costs than expected. The company said that a "higher than anticipated acceptance rate under its early retirement programme and faster than expected implementation of the workforce reduction programme" will push restructuring costs up to between $1.5 billion and $1.7 billion, an increase from its previous estimate of around $1 billion.
In May, HP announced plans to cut 27,000 jobs by 2015, including 9,000 job cuts by November this year. “Workforce reductions are never easy,” Whitman said at the time. “They adversely impact people’s lives, but in this case they are absolutely critical for the long-term health of the company."
HP said that not including the impairment and restructuring costs, its non-GAAP earnings per share outlook has increased from 94 cents to $1. However, when those costs are included it stands to make a huge loss for the quarter.