It appears that “Slasher” Whitman has not finished her pruning of the topiary that is HPE. During the rather successful quarterly earnings call, on which HPE reported that it managed to beat Wall Street targets, she stated that “we are reducing the layers in our customer-facing organizations and shifting resources to the geographic markets that will drive the vast majority of our business…Now, as a smaller organization with fewer lines of business and clear strategic priorities, we have the opportunity to create an internal structure and operating model that is simpler, nimbler, and faster.” According to CFO Tim Stonesifer, HPE is “committed to $1.5 billion of gross savings over the next three years,” including the $200 to $300 million in savings already announced for the second half of 2017.
According to a Bloomberg report, which cites sources who wish to remain anonymous, HPE is looking to lay off up to 5,000 workers, or another 10% of the global workforce, before the end of the year. These layoffs, as evidenced in Whitman’s statement, will aim at reducing the management layers within HPE, a not-too-unexpected move considering the massive number of layoffs and divestitures HPE has been implementing since the split in 2015. These have included the $8.8 billion spin/merge of its non-core software business to Micro Focus, the offloading of its OpenStack interests, the spin/merge of enterprise services with CSC, the sale of TippingPoint, and the creation of H3C from the merger of some of HPE’s China-based businesses with Tsinghua Holdings.
HPE is a shadow of its former self, the behemoth that was HP before the split. A large number of analysts are wondering where and how it will escape this Coriolis; it is in a perfect storm of disruption. On the one hand, cloud is eating its lunch, as enterprises are not buying as much hardware as they used to. On the other hand, those are that are not moving lock, stock, and barrel to the cloud are not buying as much tin due to greater virtualization densities because of performance increases in processors, RAM, and SSDs.
I personally believe that Whitman and the board have been very astute in their disposals. One thing that appears to have been missed by the majority of analysts is that the vast majority of disposals have been as spin/mergers in which HPE has managed to keep over 50% of the company, thereby owning a controlling stake in the resultant company.
HPE shareholders hold 50.1% of the shares of the combined Micro Focus group, and Chris Hsu, the former head of HPE’s software business, is Micro Focus’s new CEO. The merger of CSC and technical services to form DXE has resulted in Whitman’s being on that board, too. These deals have driven a significant amount of shareholder value, and HPE shareholders now have a controlling interest in a large number of companies.
Yes, HPE appears to be going down the plug hole, but looking at the wider picture, the shareholders are happy. The jury is still out on whether HP and HPE can survive this period of turmoil and disruption, but if they do, they will be vastly different companies from what they are now.
Although this is good for shareholders, it not nice for the people who are employed by HPE, as they once again enter a holiday period with the spectre of redundancy hanging over their shoulders. We can assume that this set of layoffs will reduce HPE’s holiday party budget, further increasing those bottom-line savings that it is demanding.