HPE to simplify organizational structure, to drive cost savings of $1.5B
HPE President Antonio Neri gave additional detail on an initiative called HPE Next. Through HPE Next, the company will simplify the organizational structure, redesign business processes and prioritize investments in growth areas. The company will also right-size its end-to-end cost structure. "The goal of HPE Next is to simplify our operations, strengthen our execution and shift our investments in innovation towards high growth and higher margin solutions and services," said Antonio Neri, President of HPE. "Ultimately, HPE Next will create a fit-for-purpose company and deliver the next wave of shareholder value." The HPE Next program will drive significant net savings with an attractive return on investment. Over the next three years, the program will drive gross cost savings of $1.5 billion. HPE will reinvest about $700 million of that back into the company in the form of go-to-market, operational and R&D investments in key growth areas. Net cost savings will be approximately $800 million on a run rate basis exiting fiscal year 2020. In order to achieve this level of cost savings, HPE expects approximately $1.1 billion in cash funding payments over the duration of the program. Approximately two thirds of the funding will be utilized to optimize the workforce. The remainder will be used to upgrade and simplify IT systems, in addition to other non-labor actions. These payments will be partially offset by real estate sales, which should generate approximately $300 million in cash over the next three years.