Hewlett Packard Enterprise to implement major cost cuts because of COVID-19
Amid eroding sales due to the COVID-19 pandemic, business technology giant Hewlett Packard Enterprise plans a major overhaul, including layoffs, that it says will save $1 billion by 2022.
The company, which makes data center hardware and software, announced the plan on Thursday while reporting its fiscal second quarter earnings, which ended April 30. As part of the plan, HPE will temporarily slash employee salaries, from July 1 to Oct. 31, with executives being hit the hardest.
HPE executive salary will be reduced 20% or 25% based on the job, the company said. The company will also close an unspecified number of offices to save on real-estate costs as it shifts to a work-from-home model following shelter-in-place orders across the country.
Asked about the specifics of layoffs, an HPE spokesperson indicated that the number of jobs to be cut had yet to be determined, saying the company would be “working through the details in the next couple months as we evaluate the various areas where we can drive savings.”
“As a CEO telling employees we are going to cut salaries, that’s not an easy thing to do,” HPE CEO Antonio Neri said during a conference call with analysts. “I don’t take that lightly.”
He cited the pandemic’s huge impact on the economy as the reason for the cuts. HPE, and its previous incarnation as part of the Hewlett Packard technology conglomerate, has, over the past few years, periodically fired thousands of workers. Those layoffs were done as the company tried to adapt to a changing technology landscape in which businesses are buying fewer servers and computer storage devices—its core products.
HPE has increasingly pushed into providing IT software services to businesses that are sold in a pay-as-you-go model, but it still relies heavily on selling data center hardware.
In the latest quarter, HPE’s sales dropped 16% year-over-year to $6 billion, which Neri attributed to a disrupted supply chain, resulting from the company being unable to ship products as fast as it previously could.
“We ship three servers every minute, so when the supply chain stops, it’s pretty significant,” Neri said.
Additionally, Neri described how shelter-in-place orders have made it difficult for HPE employees to visit customer facilities to install supercomputers. Those computers must be activated before HPE can recognize any revenue from their sale and for related software services it sells to customers, Neri explained.
On a promising note, Neri said that “China is pretty much back to normal,” which could help with the company’s supply chain woes. But any positive development in China wasn’t enough to reverse HPE’s decision, made in April, due to the pandemic, to withdraw its financial forecast.
HPE shares fell 5.4% to $9.80 in after-hours trading.