HP writes down a whopping $8bn from EDS gobble
Enterprise Services head rolls, Q3 profits boosted a few pennies
Hewlett-Packard has taken a fine-toothed comb to its Enterprise Services business and said it needs to write down $8bn in goodwill assets - presumably most of which come from its $13.9bn acquisition of services giant Electronic Data Systems back in May 2008.
HP, which is restructuring, also announced that John Visentin, who was tapped by former HP CEO Leo Apotheker to manage the Enterprise Services behemoth a year ago, is leaving the company.
There has been a bit of a revolving door at the HP Services business: Tom Ionnatti, who was given the job in February 2010, was moved aside in a major executive reshuffle under Apotheker in June 2011. That also saw long-time HPer Ann Livermore removed from running the Enterprise Business (which combined systems and services) and kicked up to the board of directors.
In a statement, HP said it has asked Mike Nefkens, who is running Enterprise Services in the EMEA region, to take over the global Enterprise Services group, which runs HP's consulting, outsourcing, application hosting, business process outsourcing, and related services operations.
(Technology Services, which does tech support on hardware and software and which used to be part of the Enterprise Services biz, is now part of the Enterprise Server, Storage, and Networking group under Dave Donatelli.)
Nefkens has been given the job on an "acting basis", which presumably means HP is yet again looking for a new head for its services biz. Nefkens came to HP from EDS and was in charge of big services accounts; he will report directly to CEO Whitman.
Jean-Jacques Charhon, who was CFO for Enterprise Services, has been elevated to a COO position and will "focus on increasing customer satisfaction and improving service delivery efficiency, which will help drive profitable growth". Charhon used to be VP of finance at the Personal Systems Group at HP which has been merged with printers in the wake of Whitman's appointment last year.
The $8bn write down of assets in the Enterprise Services is a big deal on the books, since it indicates that a lot of what HP thought was valuable when it bought EDS four years ago turns out to not be worth all that much after all. HP said that this goodwill impairment will not affect its cash or the ongoing business of Enterprise Services.
HP also said in its statement that its workforce reduction plan, announced in May to eliminate about 27,000 people from its 349,600-strong global workforce, was proceeding ahead of schedule.
More people than expected are taking early retirement offers from HP, and layoffs are also ahead of plan, and therefore HP will be taking a pre-tax charge of between $1.5bn and $1.7bn in its third fiscal quarter ended in July instead of the $1bn it had originally estimated when the layoffs were first announced.
Adding up the workforce and impairment charges, HP said that losses per share would come to between $4.31 and $4.49 in the third quarter. HP did not provide updated guidance for the full fiscal 2012 year, but clearly HP, its employees and customers, and Wall Street are hoping this is the beginning of a turnaround for the venerable IT supplier.
And perhaps it will be. The good news for the day was that non-GAAP earnings per share would be about $1 a share, compared to the previous guidance of 94 to 97 cents that HP projected by in May. So maybe business is getting a tiny bit better. We'll see when HP goes over its numbers for Q3 on August 22. ®
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