HP to Incur $8 Billion ‘Impairment Charge’

Matt Brian, reporting for The Next Web:

HP believes that its earnings-per-share will rise to $1.00 in its third fiscal quarter, up from previous estimates of $0.94, but will exclude the hefty $8 billion impairment charge that it expects to record in the same period.

The $8 billion charge has been derived from an overview of HP’s stock, taking in market conditions and business trends in its Services segment. This basically means after it assessed and tested the value of its assets (or goodwill), it has determined that its Services business may be overvalued. As a result, it has to issue an impairment charge on its balance sheet to take into account the reduced value of its goodwill.

I have no idea what this actually means.

Update: A few readers emailed to explain that what this means is that HP overpaid by $8 billion on acquisitions to build its Services division — presumably at least in part the $13 billion HP paid for EDS in 2008. Keep that in mind next time you see someone draw up a list of expensive acquisitions for Apple to expend its cash hoard upon.

★ Wednesday, 8 August 2012