Hewlett Packard Enterprise (HPE) announced it will lay off 5% of its workforce, over 2,500 employees globally, as part of a cost-saving initiative, leading to a 16.5% drop in shares after-hours. The company forecasts second-quarter revenue between $7.2 billion and $7.6 billion, below Wall Street’s estimate of $7.93 billion. The cost-saving program aims to achieve gross savings of approximately $350 million by fiscal 2027, with expected cash charges of $350 million over two years. HPE faces weak enterprise spending and heightened competition from rivals like Dell and Super Micro, affecting its overall performance and confidence within the industry.
(Reuters) – Hewlett Packard Enterprise announced on Thursday that it plans to reduce its workforce by 5%, amounting to over 2,500 employees worldwide, as part of a cost-cutting initiative. The company also projected its second-quarter revenue to fall short of Wall Street expectations, resulting in a 16.5% decline in shares during after-hours trading.
The initiative is set to be executed through the fiscal year 2026 and aims to achieve approximately $350 million in gross savings by fiscal 2027, according to the company. As of October 31, 2024, HPE employed nearly 61,000 staff members.
HPE anticipates cash charges of around $350 million over the next two years related to the cost-saving initiative, with $250 million expected to be incurred in fiscal 2025 and the remainder in 2026.
Michael Ashley Schulman, chief investment officer at Running Point Capital, remarked that HPE’s job cuts “will likely have ripple effects throughout the industry and undermine the confidence of employees and managers at other tech firms.”
The server manufacturer is forecasting revenue between $7.2 billion and $7.6 billion for the second quarter, whereas analysts are predicting $7.93 billion, according to data compiled by LSEG.
Spending from enterprise customers has remained subdued due to cost-cutting measures in light of economic uncertainty and elevated interest rates, affecting companies like HPE.
Additionally, HPE is facing increasing competition from other server manufacturers, such as Dell Technologies and Super Micro Computer.
(Reporting by Juby Babu in Mexico City; Editing by Mohammed Safi Shamsi)