Hewlett Packard Co. (HP) has taken a massive loss of $9 billion in its latest quarter due to a writedown of the value in its services businesses, which shows that the company overpaid when it spent $13 million in 2008 on Electronic Data Systems. Former HP CEO Mark Hurd OK’d the EDS deal while still working for the company. Hurd stepped down as CEO in 2010 due to a scandal involving a former actress who worked for the company as a contractor.
Meg Whitman, HP’s current CEO has been trying to fix what Hurd had left since she has taken on the role. According to Whitman, the mess probably won’t be cleaned up until 2016. And by cleaning up the mess she means eliminating 27,000 jobs, which is 8% of its workforce.
Job cuts are expected to be finished in 2014.
HP introduced an early retirement plan and are expected to dish out $1.5 to $1.7 billion of severance pay instead of the $1 billion they had anticipated.
HP also took an $8 billion non-cash charge in the quarter that ended in July to record the reduced value of its Enterprise Service division. This division has not generated any increasing revenue in the past two years and its operating profit declined.
Head of Enterprise Service division, John Visentin, had left the company to “pursue other interests” and was replaced on interim by Mike Nefkens, who is currently head of the Enterprise Services in Europe, Africa and the Middle East.
In spite of the charges, HP expects to make $1 per share during the fiscal third-quarter, which is a few cents more than they made in the past, but the stock has still lost half of its value since Hurd left the company and has fallen by 15 percent since Whitman has been in charge.
According to reports, investors are content with the adjusted higher earnings HP plans to report for the fiscal third-quarter results, which will be available on August 22. HP shares gained 45 cents, closing at a total of $19.41 on Wednesday.