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HP revises Q1 earnings to factor in EDS litigation charges |
HP has revised downwards its previously announced financial results for the first quarter that ended January 2010 after developments in litigation involving Electronic Data Systems Corporation (EDS), a company HP acquired in August 2008.
The company increased contingency reserves previously established for the litigation. The increase has necessitated HP's downward revision of its first quarter net earnings of around $73 million, or $0.03 per diluted share. In its statement, HP said EDS and one of EDS's subsidiaries are defendants in litigation filed in the United Kingdom by Sky Subscribers Services Limited and British Sky Broadcasting Limited (BSkyB) in 2004 pertaining to a customer relationship management project that was awarded to EDS in 2000.
At a hearing on March 1, 2010, the court ordered EDS to make an interim payment to BSkyB of £70 million, approximately $112 million, which is in addition to an interim payment of £200 million, or approximately $320 million, that HP made voluntarily to BSkyB in February 2010. Following the March 1 hearing, HP thought it appropriate to increase the contingency reserve. It said it will continue to evaluate the reserve pending final resolution of the litigation.
The court's March 1 order followed an earlier decision in January 2010 that dismissed the majority of BSkyB's claims against EDS but found the company liable in certain areas. HP said it is seeking permission to appeal the ruling.
The updated financial results, HP said, do not reflect any other changes or adjustments to its previously announced first quarter financial results. As a result of the revisions, the company's GAAP net earnings for the quarter have been revised to $2.25 billion and GAAP diluted earnings per share (EPS) has been revised to $0.93 per share, down from GAAP net earnings of $2.32 billion and GAAP diluted EPS of $0.96 as previously reported on February 17, 2010. HP did not provide updated guidance for either its second fiscal quarter or the remainder of its 2010 fiscal year.
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