It was a downcast day for workers in San Jose’s tech industry. Hewlett-Packard yesterday announced a strategy update and financial outlook that will see the company cut another 25,000 to 30,000 jobs.
At its 2015 Securities Analysts Meeting, Meg Whitman (pictured), the current Chairman, president and CEO of HP who will become president and CEO of Hewlett Packard Enterprise (HPE), offered insights into how the new company will leverage its strengths in infrastructure, software services and cloud.
"Hewlett Packard Enterprise will be smaller and more focused than HP is today, and we will have a broad and deep portfolio of businesses that will help enterprises transition to the new style of business," said Whitman. "As a separate company, we are better positioned than ever to meet the evolving needs of our customers around the world."
Massive Cost Cutting
Whitman explained that the new HP will help enterprise customers address what it has identified as the four biggest challenges: transforming to a hybrid infrastructure that gives enterprises greater flexibility and agility without disrupting legacy systems; protecting the digital enterprise from external risk; helping organizations use data that yield necessary insights to forecast risk and opportunity; and driving workplace productivity by delivering the tools optimized for business critical tasks at the right economics.
According to the financial outlook, HPE will have over $50 billion in annual revenue. The company will drive that revenue by focusing on delivering competitive integrated technology solutions to a market that has the potential to exceed $1 trillion over the next three years.
Part of the equation, of course, is cost-cutting. Tim Stonesifer, who will become CFO of HPE, presented a plan to drive $2.7 billion in ongoing annual cost reductions. One of the biggest facets of the cost-cutting campaign is slashing 25,000 to 30,000 people from the company.
"These restructuring activities will enable a more competitive, sustainable cost structure for the new Hewlett Packard Enterprise," said Whitman. "We've done a significant amount of work over the past few years to take costs out and simplify processes and these final actions will eliminate the need for any future corporate restructuring."
‘The Board Has No Clue’
We turned to Rob Enderle, principal analyst at the Enderle Group, to get his thoughts on the restructuring -- and layoffs. He told us HP is getting into scary territory after over a decade of cuts. The latest round of layoffs sits on top of the already-announced 55,000 cuts and an organizational split that should have found the company with 10,000 fewer employees that it needs to operate efficiently.
“This should make much of the firm non-viable without the critical mass of employees needed to operate once all the cuts have been completed,” Enderle said. “Worse is the fact they are leaving most of these folks in place, in kind of a job limbo, with no promise of a raise, bonus, or even a job in front of them. That will not only be disruptive to the people who are staying, but the people who are leaving are most likely to focus on complaining or working on getting another job.”
Enderle said the impact over the next few months on a company already struggling will be dire. If the remaining employees can keep the firm afloat, they should be up for medals of heroism, he added.
“This showcases what happens when a firm's board has no real clue how the company works and gets a CEO who doesn't either," Enderle said. "This should spike the stock though, suggesting Whitman has an exit strategy. Rumored is that Oracle will buy the firm if it is lean and cheap enough, though it is possible that [former Oracle CEO] Larry [Ellison] has head-faked Whitman, which has driven her to cripple HP for him. Either way he wins.”