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HPE hatches HPE Next – a radical overhaul plan so it won't be HPE Last

CEO Meg Whitman tells staff she's signed pact with Faust

By Paul Kunert, 13 Jun 2017

Exclusive Hewlett Packard Enterprise has hatched a radical plan to overhaul processes, investments, people and overheads in a project that is “likely to determine” its “relevance in the years ahead.”

HPE Next is an initiative which will sit under the control of Jon Faust – senior veep of finance, worldwide financial planning and analysis, and global functions – CEO Meg Whitman confirmed in a memo to staff, seen by El Reg.

“The goal of HPE Next is to produce an organization that is precisely built to compete and win in the marketplace. Through HPE Next we will clean-sheet our operating model and organizational structure to simplify and improve how we work,” said Whitman.

“We’re going to review all of the processes of the company, as well as the accountabilities, to see where we can be more agile. We will look at how we can prioritize investments in growth areas and capabilities that set us up for the future.

“And finally, we’re going to right-size end-to-end cost structures of HPE to ensure we deliver on our financial architecture,” the CEO added.

The ultimate aim is to produce a “long-term operating and financial blueprint,” Whitman said. “It is a project on par in scope with any of the recent separations we’ve managed and is likely to determine HPE’s relevance in the years ahead.”

Faust, who will lead the HPE Next Leadership Management Office, “brings a valuable perspective to this critical mission,” as he currently straddles the corporate and business groups and oversees finance for all global functions.

The planning phase of the project is due to be done and dusted by the start of HPE’s new fiscal year on November 1.

All this rather sounds like nothing is sacred at HPE in terms of internal infrastructure and policies – much as they haven’t been for the cloud giants like Amazon. A company that sells digital transformation is seemingly going to eat its own dog food.

The chatter inside some corners of the company is that HPE is vulnerable to a takeover, given the size of its bottom line, but Whitman is doing the work that private equity houses would do if they took the business private.

A walk down Memory Lane

Whitman took over HP in 2011, inheriting a $100bn plus business that had lost its way. At first, she said the company would not be broken up, as her predecessor Leo Apotheker had advised during his time at the top. But that all changed in late 2015, with the PC and print divisions spun off to create HP Inc and the remainder rebranded as HPE.

Not satisfied with that, Whitman then offloaded Enterprise Services in April this year and is still in the process of getting rid of the software business. HPE also made some buys of enterprise hardware firms along the way, including Aruba, SimpliVity, SGI and Nimble Storage.

But sales and profit growth have still not materialized: in the first half of fiscal ’17 ended April 30, like-for-like revenue shrank 11.5 per cent year-on-year to $15bn and operating profit fell to $1.76bn, down nearly 19 per cent.

Perhaps most worrying in the results was the 14 per cent dive in server sales, something that has cast doubt over HPE’s server cloud joint venture with Foxconn, though the company claimed its core server portfolio was stable. Operating margins in the server unit were down.

After the results, HPE said on a conference call it was looking to save $200m to $300m in costs by November by cutting discretionary expenses including employee travel, and reducing contractors and axing permanent staffers.

HPE had not commented to us at the time of publication. ®

Updated to add

An HPE spokesman sent us a statement:

"We are taking a deep look at our end-to-end cost structure, business processes and organisational design. Building this ongoing process into our DNA will ensure that the smaller, nimbler go-forward company is set up to win in the markets where we compete."

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