HPE kicked off its much-dreaded layoffs globally on Monday as part of its Next overhaul campaign.
The cuts were expected, but still cast a pall over the enterprise IT giant. In June, we revealed the existence of the HPE Next project: a radical three-year plan to overhaul HPE's processes and investments, and optimize its people and overheads to make itself relevant again.
And by optimize, it means it will cut or move positions to low-wage places to save the biz a pretty penny. In September, it emerged the axe was being sharpened for 5,000 of its 50,000 workforce, or one in ten.
On Monday this week, as part of HPE Next, the axe fell around the world: hundreds of employees were told they were being made subject to a fresh wave of so-called workforce reductions, with US pre-sales teams taking a big hit. "Thousands of layoffs globally at HPE happening starting today," a Reg source close to the IT giant told us, who estimated that as many as one in five workers may face the chop.
In a statement today, a spokesperson for Hewlett Packard Enterprise tactfully confirmed a new round of redundancies was beginning, telling us:
As we said at our Securities Analyst Meeting, HPE Next is a three-year program that will fundamentally redesign the company. We are streamlining our operations, manufacturing, IT systems, and go-to-market with the goal of setting HPE up to compete even more successfully in the years ahead. The program will include both reductions as well as investments in a variety of areas. We did not disclose a headcount target, but said that about two-thirds of the overall program will be associated with workforce optimization.
In a filing to America's financial watchdog, the SEC, late last week, HPE also declared:
On October 16, 2017, the Board of Directors of Hewlett Packard Enterprise Company (“Hewlett Packard Enterprise” or "HPE") approved a restructuring plan (“the plan”) in connection with the company’s initiative to clean-sheet the operating model, simplify the organizational structure, redesign business processes and prioritize investments in growth areas, known as HPE Next. HPE expects that the plan will be implemented through fiscal 2020 and will include gross cost savings as a result of changes to the company’s workforce, real estate consolidation, and business process improvements of up to approximately $1.5 billion. HPE will invest about $700 million of the gross savings back into the company in the form of go-to-market, operational and R&D investments in key growth areas. Net cost savings on a run-rate basis will be approximately $800 million exiting fiscal year 2020.
In other words, mid-October, the board gave the green light for mass redundancies and other slashing to save $1.5bn between now and 2020. Some $700m of those savings will be plowed back into the biz.
"In order to achieve this level of cost savings, HPE expects approximately $1.1 billion in cash funding payments over the duration of the program," the company added in its statement to the SEC.
"Approximately two thirds of the funding will be utilized to optimize the workforce. The remainder will be used to upgrade and simplify IT systems, in addition to other non-labor actions. These payments will be partially offset by real estate sales, which should generate approximately $300 million in cash over the next three years."
HPE CEO Meg Whitman unveiled the HPE Next initiative earlier this year as a long-term plan to turn around the company's sagging financial returns. In addition to the usual talk of focusing emerging technologies and areas with better growth prospects, Whitman made a point of noting that HPE was going to be taking the axe to many of its business units, and the people that staff them.
In the three months to July 31, HPE's revenues were up three per cent, year on year, to $8.2bn. Its profit slumped to $165m from $2.27bn in the year-ago period, due to bills from its previous round of redundancies and severances.
Meanwhile, HPE has essentially walked away from cloud servers two weeks after trying to claim the product line was safe from Meg's chainsaw. ®