HPE And IBM Announce Cuts To Jobs And Salaries Following Global Health Crisis

Both Hewlett Packard Enterprise and IBM are undergoing layoffs as the coronavirus pandemic's financial impact hits the tech giants.

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IBM has already made thousands of cuts to its workforce, including its Global Technology Services division, which offers IT outsourcing. IBM ended 2019 with more than 350,000 workers.

"IBM's work in a highly competitive marketplace requires flexibility to constantly remix high-value skills, and our workforce decisions are made in the long-term interests of our business," IBM said. "Recognizing the unique and difficult situation this business decision may create for some of our employees, IBM is offering subsidized medical coverage to all affected U.S. employees through June 2021," the spokesperson added.

The job cuts are the first significant sign of restructuring under the helm of new president James Whitehurst and CEO Arvind Krishna, who both joined the company in April amidst the global health crisis. Tasked with rekindling growth at IBM following recent quarters of declining revenue, Krishna's plan may have included mass layoffs and restructuring. Before becoming CEO, he was Senior Vice President of IBM's cloud and cognitive software businesses, and is credited with driving the $34 billion Red Hat acquisition the company made in 2018.

Meanwhile, The Register reported that all HPE salaries would be reduced, with the exception of front-line sales workers. The company also plans to pause promotions and raises and restrict hiring for the foreseeable future.

HPE CEO Antonio Neri explained how the pandemic has affected the company: "The global economic lockdowns since February significantly impacted our fiscal Q2 financial performance." He also added that the company is "taking decisive steps to navigate the near-term uncertainty while ensuring we align resources to prioritize growth areas so that we are well-positioned to accelerate our edge-to-cloud strategy and address the needs of our customers in a post-COVID-19 world."

Neri and the rest of the executive team will take a pay cut of 20% to 25%, which will save HPE at least "$1 billion and annualized net run-rate savings of at least $800 million by fiscal 2022 year-end."

Each of the company's departments experienced losses in the last quarter. High-Performance Computer & Mission Critical Systems revenue was down the most year-on-year, with a fall of 18% to $589 million. The Storage division was also hit hard, falling 16% to $1.1 billion. Profit margins in both divisions also diminished.