HP forecasts €6.5bn charge on EDS deal
HEWLETT-PACKARD, the struggling US tech conglomerate, said that it was taking an $8 billion (€6.5 billion) writedown related to the division dominated by the former EDS technology services group, which it bought for $14 billion in 2008.
Meg Whitman, chief executive, is attempting to restructure the group after a turbulent two years in which HP forced out two chief executives, veered between consumer and business-oriented strategies and saw its share price slump.
“This is painful and long overdue but progressive,” said Richard Doherty at Envisioneering, a technology research company. “At least Meg Whitman is acknowledging that the EDS business doesn’t fit and is doing something about it. But why did they not address EDS a year ago, rather than going and spending $11 billion on another acquisition?”
The purchase last year of UK software firm Autonomy angered Wall Street. Ms Whitman oversaw the departure of its founder Mike Lynch from HP and it emerged that as many as a quarter of the UK company’s staff had quit.
HP, which is cutting 27,000 jobs, also said that falls in its share price had prompted a review of the value of its assets. Its shares are down 60 per cent over five years, 37 per cent over one year and 25 per cent in the year to date.
It also increased a planned pre-tax charge it expects to take in the third quarter from $1 billion to between $1.5 billion and $1.7 billion as larger numbers of staff were opting for early retirement. The services division accounts for 29 per cent of revenue and consists mainly of the EDS business.
– (Copyright The Financial Times Limited 2012)