HP's revenue sank five per cent from last year to $29.7 billion
SAN FRANCISCO—Technology giant Hewlett-Packard reported its largest quarterly loss ever and owned up to past mistakes that have left it scrambling to adapt to a shifting market.
The loss of US$8.9 billion didn’t come as a surprise: HP telegraphed the news earlier this month when it disclosed plans to take an $8 billion charge to reflect the shrinking value of Electronic Data Systems, a technology consulting service it bought for $13 billion in 2008.
The loss represented another mortifying setback for a 73-year-old company that once had the reputation for being a fountain of innovation and a great place to work.
HP’s revenue sank five per cent from last year to $29.7 billion, about $500 million below the projections of analysts polled by FactSet. It marked HP’s fourth consecutive year-over-year quarterly decrease in revenue.
Now, HP is struggling to reverse perceptions that it’s becoming a technological dinosaur bogged down in bureaucracy as it slashes its work force to help offset a downturn in revenue.
The company is counting on Meg Whitman, its third CEO in slightly more than two years, to be its saviour. While stressing she believes HP can still be great again, Whitman made it clear that it will be a long slog.
“Make no mistake about it: We are still in the early stages of a turnaround,” Whitman told analysts during a conference call.
Whitman, who became one of the world’s best-known chief executives during a decade-long stint running eBay Inc., has been shaking things up at HP by reorganizing divisions, ushering in new managers and slashing costs through the job cuts.
HP also had to absorb charges to cover severance payments for the first wave of the 27,000 workers it is jettisoning to dramatically reduce its expenses as its revenue shrivels. The company, which is based in Palo Alto, California, now expects to drop 11,500 employees from its payroll by the end of October, up from its previous target of 9,000. Another 15,500 employees will be let go through October 2014.
The cutbacks are driven by the rising popularity of mobile phones and tablet computers—devices that are reducing demand for personal computers.
That’s bad news for HP, which is the world’s largest maker of PCs and printers.
To cope with the upheaval, HP has been expanding into technology consulting, computer software, data storage and high-end servers made for companies and government agencies, a strategy similar to one used by one-time competitor IBM more than a decade ago. All those specialties are more profitable than the fiercely competitive PC market, but HP hasn’t been evolving rapidly enough to avoid an alarming deterioration in its financial performance.
If HP’s slump worsens, management warned it may have to register additional charges in the current quarter to account for trouble in other acquisitions. Without citing specifics, HP executives pointed to the company’s software operations as one area that could be lumped with a major accounting charge. That division includes Autonomy, a business software service that HP bought for $11 billion last year.