PALO ALTO, Calif., Wed Aug 8, 2012 – Hewlett Packard Co. raised its third-quarter earnings forecast on Wednesday and said it was writing down the value of its services business by $8 billion.
The world’s No. 1 personal computer maker also said more employees than expected were taking early retirement and it was implementing a workforce reduction program faster than expected. Because of this, it raised its estimate of a pre-tax restructuring charge to as much as $1.7 billion.
HP said it now expects third-quarter earnings, excluding one-time items, of about $1.00 per share, compared with analysts’ average estimate of 97 cents, according to Thomson Reuters I/B/E/S.
HP previously forecast earnings of 94 cents to 97 cents per share. It did not say why it was raising its outlook.
The company’s shares gained 2.5 percent to $19.44 in mid-morning trading.
“Everybody was expecting them to miss the quarter. Now they said they are going to beat their forecast. That’s why the stock is up,” said Shaw Wu, an analyst with Sterne Agee.
HP said it did not expect the writedown in the services business to result in “any future cash expenditures or otherwise affect the ongoing business or financial performance” of the segment.
The company, which announced major job cuts in May, said it now expects a pre-tax restructuring charge of between $1.5 billion and $1.7 billion, up from a previous estimate of $1 billion.
HP said in May that it planned to cut about 27,000 jobs, or 8 percent of its workforce, over several years in an effort to save up to $3.5 billion annually.