COVID-19 Impact: HPE Implements Short-Term Salary Reduction Plan

“We are taking some immediate steps to reduce operating expenses that will protect our financial profile,” said HPE CEO Antonio Neri. “Effective July 1, we will implement a short-term pay reduction for all team members where it is legally permitted through Oct. 31, 2020. My executive team and I will take the highest percentage reduction.”

Hewlett Packard Enterprise has implemented a short-term salary reduction plan in the wake of the financial turmoil from the COVID-19 pandemic.

In response to the “economic uncertainty caused by the COVID-19 pandemic,” HPE’s board of directors has approved a plan to reduce salaries for HPE employees—including the executive team—effective July 1 to October 31.

The salary reduction will vary based on the employee level, with the highest salary pay cut of 25 percent hitting the HPE executive team, including Neri himself.

The cost-containment measures also include a hiring and salary freeze through Oct 31.

“We are taking some immediate steps to reduce operating expenses that will protect our financial profile,” said Neri in a conference call with analysts Thursday after HPE reported lower-than-expected sales and earnings for its second fiscal quarter, ended April 30. “Effective July 1, we will implement a short-term pay reduction for all team members where it is legally permitted through Oct. 31, 2020. My executive team and I will take the highest percentage reduction.”

Neri and HPE executive vice presidents will take a 25 percent salary cut, and HPE senior vice presidents will take a 20 percent pay cut, the company said.

HPE’s board members, meanwhile, will take a 25 percent cut in the portion of the annual $100,000 cash retainer to which each director is entitled for the period.

For employees that live in countries where pay reductions are not legally permitted, HPE is implementing unpaid leave.

Overall, HPE reported non-GAAP earnings of 22 cents per share on a 16 percent decline in sales from the year-ago period to $6 billion. The results were below the Wall Street consensus of 29 cents per share on $6.28 billion in sales.

Under a three-year “Cost Optimization and Prioritization Plan,” HPE aims to achieve $1 billon in gross savings with changes to the company’s workforce, real estate model and business processes.

The cost optimization plan is expected to result in cash payments over the next three years of $1 billion to $1.3 billion with annual run rate savings of at least $800 million by the end of fiscal year 2022.

“My goal is to adapt the organization to be more agile, to align our resources to the critical core business areas of growth and ultimately to accelerate our [edge-to-cloud platform-as-a-service) strategy,” said Neri.

Nalit Patel, CEO of All Solutions, a Livingston, N.J.-based solution provider, said HPE is one of the industry heavyweights that is going to succeed in the post-coronavirus world.

Patel said Neri’s next-generation edge-to-cloud platform-as-a-service vision is going to fuel a new era of growth for HPE and its partners.

“Antonio has done a good job,” said Patel. “HPE is bringing the compute and networking closer to the edge, giving the customer the ability to do what they want to do, where they want to do it and how they want to do it. HPE has married the legacy compute business with the edge networking, giving customers a seamless transition to the next level of software-defined computing.”

Patel said one of HPE’s biggest advantages in the pandemic era is HPE Financial Services. “HPE’s financing business gives you the ability to do what you need to do to close deals,” he said. “What HPE is providing with its everything-as-a-service model is an agnostic solutions approach. HPE has no conflict of interest like some of the public cloud providers.”

Patel said he sees GreenLake offering customers lower-cost, workload-optimized solutions versus public cloud competitors. “HPE needs more wins versus public cloud to increase their cloud footprint,” he said. “HPE needs to bring someone like Netflix to the table and label it as ‘powered by HPE.’ That would put HPE in a very different strata.”

Patel said he sees GreenLake becoming a bigger part of his business later in the year as more businesses reopen. “Covid-19 has put a lot of purchases on hold,” he said. “Right now it’s survival mode with everyone taking care of their employees.”