The art of taxation consists in so plucking the goose as to get the most feathers with the least hissing - Jeane Baptiste Colbert
MAKER OF EXPENSIVE PRINTER INK HP announced a $6.9bn loss for its fourth quarter as revenues and operating margins fell while a write-down of $8.8bn on its acquisition of Autonomy put paid to any hopes of posting a profit.
HP's painful 2012 continued with the firm racking up a huge loss as sales in just about every division declined while operating margins fell sharply. This resulted in the firm reporting a $6.9bn loss on revenues of $30bn, seven percent down from the same quarter last year.
Not only is HP's $6.9bn quarterly loss shocking but dissecting it reveals a company in trouble. After the firm posted a $8bn write-down on its EDS purchase, it has had to wipe $8.8bn off its purchase of Autonomy due to "accounting improprieties, misrepresentations and disclosure failures".
HP effectively said that Autonomy's board had inflated the value of the firm, a firm HP paid $12bn to buy. HP issued a statement saying, "HP is extremely disappointed to find that some former members of Autonomy's management team used accounting improprieties, misrepresentations and disclosure failures to inflate the underlying financial metrics of the company, prior to Autonomy's acquisition by HP. These efforts appear to have been a willful effort to mislead investors and potential buyers, and severely impacted HP management's ability to fairly value Autonomy at the time of the deal. We remain 100 percent committed to Autonomy and its industry-leading technology."
Aside from HP's write-down of Autonomy, things weren't much better for the firm. HP reported that revenue in its PC division fell by 14 percent from the fourth quarter last year, while its printing division revenue fell by five percent. Revenue in the firm's enterprise division, which includes server and networking equipment, fell by nine percent, while its services division revenue fell by six percent.
Only HP's software division, which includes the once over-valued Autonomy, showed any sign of life, posting a 14 percent increase in revenue, while the firm's financial services arm, which funds HP customers' investments to buy HP products and services, saw a nominal one percent increase in revenue. All in all, the firm's hardware divisions performed very badly, and sales at Autonomy could only go so far to turn the red ink to black in its software division.
HP CEO Meg Whitman avoided any mention of the steep loss and declines in revenue almost across the board by saying, "We're starting to see progress in key areas, such as new product releases and customer wins. We're particularly pleased that in Q4, we were able to improve our balance sheet, generating $4.1 billion in operating cash flow, and we returned $384 million to shareholders in the form of share repurchases and dividends."
Whitman has already scratched 2013 and HP's stock price hit a 10-year low on Friday. While Whitman has been given time to clean up the mess left by former CEO Leo Apotheker, she and the board must hope that things won't get much worse before they start to get better. µ
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