(By Balaseshan) PC maker Hewlett-Packard Co. (NYSE:HPQ) increased its third quarter earnings guidance and said it will record a $8 billion goodwill impairment charge in its services segment in the current quarter.
For the third quarter, the company raised its adjusted earnings outlook to about $1.00 per share from previous forecast range of $0.94 to $0.97 per share, while Street analysts predicts $0.97 per share.
Adjusted profit estimates exclude after-tax costs related primarily to the amortization and impairment of purchased intangible assets, goodwill impairment charges, restructuring charges and acquisition-related charges.
The company said the goodwill impairment would be recorded as a non-cash pre-tax charge in the third quarter of its fiscal 2012. The impairment review stems from the recent trading values of HP's stock, coupled with market conditions and business trends within the Services segment.
HP does not expect this estimated goodwill impairment charge to result in any future cash expenditures or otherwise affect the ongoing business or financial performance of its Services segment.
Additionally, HP raised pre-tax charge guidance for the third quarter to about $1.5 billion to $1.7 billion from previous estimate of about $1 billion. The charge will be included in GAAP financial results.
The company updated the pre-tax charge amount in relation to its restructuring program announced on May 23, 2012. The change is primarily driven by a higher than anticipated acceptance rate under its early retirement program and faster than expected implementation of the workforce reduction program.
Given the expected impairment charge associated with the Services segment and the expected increased charge associated with the restructuring program, HP now expects third quarter GAAP loss per share of $4.31 to $4.49, including the GAAP tax impact on the impairment. Previously, the company had projected GAAP results between breakeven and earnings of $0.03 per share.
HPQ is trading up 3.64% at $19.65 on Wednesday. The stock has been trading between $17.41 and $34 for the past 52 weeks.