HPE, IBM, Dell look for ways to save money as coronavirus spreads and their business priorities shift
Like most players of the IT industry, enterprise hardware makers have seen their businesses take a significant financial hit in the wake of the coronavirus pandemic. Some top-tier companies are now taking steps to protect their long-term health, instituting layoffs, pay cuts, and hiring freezes.
The Lowdown: Hewlett Packard Enterprises, IBM, and Dell this week all made such moves at a time when market research firms like IDC and Gartner are forecasting declines in global IT spending of anywhere from 5% to 8% as businesses pump the brakes during the COVID-19 outbreak.
The Details: HPE this week announced that revenue in the latest financial quarter fell 15% year over year to $6 billion. President and CEO Antonio Neri, speaking during a conference call to discuss the earnings, said the OEM was instituting across-the-company pay reductions for all employees starting July 1 and running through Oct. 31. Neri, other executive team members, and board members will see their base sales cut 25% — the largest of the cuts – while other executives will have their pay reduced by 20%. Pay cuts for other employees will vary depending on their positions.
Between the salary reductions and other steps – including streamlining the product portfolio and implementing new digital customer engagement efforts – Neri expects HPE to save at least $1 billion by the end of its fiscal year. The moves come after HPE earlier this month reorganized its business units, putting a greater emphasis on its GreenLake hybrid cloud initiative.
IBM reportedly is cutting “thousands” of jobs in part because of the economic fallout from the pandemic, though other factors are in play as well, including the company’s continued push to grow its artificial intelligence (AI) technologies and cloud services. According to The Wall Street Journal, IBM – which has had layoffs every year for several years – would not say how many employees are losing their jobs. In a statement to the media, IBM officials said they were giving laid-off U.S. employees subsidized healthcare through June 2021. They added that workforce decisions are not made only due to current conditions but also by taking a long-term view of the business.
The layoffs were the first under new CEO Arvind Krishna, who took over for Ginni Rometty in April.
For its part, Dell Technologies announced this week that it was freezing pay raises, external hiring, and internal promotions and stopping contributions to employee 401(k) retirement plans to save money, according to a Bloomberg report. Dell’s decision comes after VMware, of which Dell is the majority owner, also cut executive pay, salaries, and 401(k) contributions, according to Business Insider.
The Impact: The global public health crisis – which forced many businesses to at least temporarily close their doors and created massive job losses, particularly in the United States – has not spared the IT industry. Gartner earlier this month said that the data center systems sector will see a 9.7% drop in spending this year, while spending on devices will fall 15.5%. However, there are parts of the industry expected to see growth as businesses manage a widely distributed workforce and grapple with business continuity concerns. Public cloud services will grow 19%, while spending on cloud-based conferencing will increase 24.3%, according to Gartner.
The Buzz: “While the world is starting to envision what the recovery might look like, we need to be prepared for different scenarios,” HPE’s Neri said. “We know there is [no] going back to what used to be, there is only preparing for and building what comes next. We need to adapt in order to keep our strategic momentum even as the world has changed dramatically. We have taken a deliberate set of actions to protect our financial foundation, become a more agile organization, and align our sources to critical core businesses in areas of growth that accelerate our edge-to-cloud platform-as-a-service strategy.”
“IBM’s work in a highly competitive marketplace requires flexibility to constantly add high-value skills to our workforce,” IBM said in a statement. “While we always consider the current environment, IBM’s workforce decisions are in the interest of the long-term health of our business.”
“While it’s difficult to predict the shape of the slowdown and a recovery, our job is to prudently manage our business so that we’re in a strong position on the other side of this situation,” Dell COO Jeff Clarke wrote in a memo. “Given the economic uncertainty that continues, we’ve made another tough decision to maintain the strength of our team and future of our company.”