HP Enterprise Will Cut 25,000 to 30,000 Jobs; Reactions Mixed

By John Russell

September 16, 2015

Even before it gets off the ground, HP Enterprise – one of the two companies HP will split into by year’s end – is getting its wings clipped. HP announced plans yesterday to cut 25,000 to 30,000 jobs from HP Enterpise.

It’s not yet clear what this will mean for HP aspirations and operation in HPC and the larger enterprise space. HPCwire reported on plans to build a Big Data and HPC focused business unit (HP Launches HPC & Big Data Global Business Unit) in June and its leader Bill Mannel, was sounding an all ahead full speed note.

Early reaction to the move varies. IDC sees the move as mostly a positive for HP to avoid post-split disruption of either of the new companies. “You don’t want to send off the new entities in a bloated fashion because then they are going to get into trouble right away and quickly have to announce job cuts to right-size. This is the right thing to do now,” said Steve Conway, IDC Research Vice President, HPC/HPDA.

“I’m not saying it’s all fine and good because there’s some pain involved here and it’s hard to say what advantages, if any, competitors get. Any time you trim that number of people, even though it might be the right thing to do, you’re going to lose some capability at least for a time. Competitors will try to take advantage, but from an HPC standpoint I don’t see this weakening HP which has kind of emerged as clear leader in the HPC server market.”

Addison Snell, CEO of analyst firm Intersect360 had a slightly different take. “Regular layoffs have been part of the natural order at HP for several years, so the notion of one more “restructuring” heading into the split isn’t really surprising. However, it would have made more sense to me to split first and then let each half take care of its own business, as opposed to handling a major layoff under a lame duck corporate infrastructure. This will make some aspects of the split harder to manage. Keep in mind, Lenovo did a major layoff of employees after they made the transition from IBM (NYSE: IBM),” said Snell.

“The severity of the layoff — about 10% of employees — is higher than I would have thought. It sends a signal that there are still operational or business problems beyond the organizational structure.

“What we don’t know at this point is to what effect HP Enterprise is affected, let alone the HPC business. As an analyst, I would hope and expect the layoffs to be concentrated in Hewlett-Packard, the PC and printer side of the business, in order to prepare to lower costs for a competitive market. If in fact a lot of the layoffs are in HP Enterprise, then that’s a different story.”

It’s still not clear how the move will impact HP stock (NYSE: HPQ) offered Conway. HP first alerted the community to the job cuts in yesterday’s Q2 earnings report. Talking on background one HP staffer said the move now will eliminate the needs for any future corporate restructuring.

HP, of course, also has grand aspirations in the broader enterprise market including data centers and the cloud. One enterprise partner, IT services provider powersolution.com, says it’s too early to know what the impact will there but offers a caution against cutting technical staff.

“From a partner standpoint, we’ve seen this before. I don’t know if there’ll be any direct impact for us. We’ll have to wait and see,” said David Ruchman, chief technology officer at powersolution. “Going backwards a little bit, I think HP is a little late to the cloud game and I think they’re playing a bit of catch-up. HP is behind companies like Amazon, Rackspace, Microsoft in the cloud.”

“Will there be an impact? My guess is there probably will be, but what level is hard to gauge at this point. [We] won’t know until after layoffs and restructuring are in place. If it’s engineers that’s a huge cut and then HP would somewhat suffer from that because, theoretically, they could fall behind on development of their infrastructure and their development lifecycle but I don’t think they’d do that because they realize it’s a huge market and they want a piece of the action.”

The New York Times reports “The big job cuts will come from HP Enterprise, in particular jobs at call centers and other service centers in developed countries. HP plans to automate many of the jobs, and build out positions in countries like India and Costa Rica. The services business had been largely dependent on just a few customers, and in 2014 it lost important accounts.

“Cathie Lesjak, HP’s chief financial officer, said HP Inc., which will have about 50,000 employees, will reduce its headcount by 1,200 employees in 2016, and a total of 3,300 employees by the end of 2018.

Longer term, HP Enterprise is also retraining its sales force, aiming to increase the amount of technology consulting and cross-selling work the company does. This is typically the kind of work done by companies like IBM, while the old HP made lower margin, but high-volume sales of individual products.”

HP’s Bill Mannel had laid out HP’s plans in some detail in the earlier HPCwire report cited above: “It’s not by mistake or coincidence we put HPC and Big Data together,” said Mannel, now VP and General Manager of the HPC & Big Data GBU. “We believe storing Big Data is one thing and we have technologies to do that. Getting productive use out of [the data] is another thing and many customers are using similar types of technologies to get value out of their Big Data.”

Hired last November and a key architect of the new GBU, Mannel discussed with HPCwire the HP strategy for expanding its HPC focus, why the timing is right to push into the enterprise, what some of the obstacles (and solutions) are, and the steady rise of new technologies – x86 still dominates (including at HP) but competitors (GPU, FPGA, OpenPower, ARM) are winning sockets in a trend likely to continue.

HPCwire’s sister publcation, EnterpriseTech conducted an interview with Mannel roughly a week ago (HP Enterprise’s Bill Mannel Talks HPC, Intel, Big Data, and More) in which there was no hint of a coming reduction or strategy shift.

It’s not clear how HP the strategy will now change. The cuts bring the total headcount reduction overseen by CEO Meg Whitman since 2011 to around 55,000. HPCWire will report more as the story unfolds.

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