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HPE To Spin Out Its Huge Services Business, Merge It With CSC (cio.com)
itwbennett writes from a report via CIO: Hewlett-Packard Enterprise announced Tuesday that it will spin off its enterprise services business and merge it with IT services company Computer Sciences Corp. (CSC) to create a company with $26 billion in annual revenue. The services business "accounts for roughly 100,000 employees, or two-thirds of the Silicon Valley giant's workforce," according to the Wall Street Journal. In a statement, HPE CEO Meg Whitman said customers would benefit from a "stronger, more versatile services business, better able to innovate and adapt to an ever-changing technology landscape." Layoffs were not a topic of discussion in Tuesday's announcement, but HPE did say last year they would cut 33,000 jobs by 2018, in addition to the 55,000 job cuts it had already announced. The company also split into two last year, betting that the smaller parts will be nimbler and more able to reverse four years of declining sales.
So many companies go through the same sequence of events:
1) Build a successful business selling hardware
2) Customers ask for help with infrastructure and applications
3) Build a successful consulting business supporting hardware sales
4) Brilliant MBA notices consulting has a much higher profit margin than hardware
5) Company outsources hardware business and focuses on consulting
6) Pipeline of customers needing consulting dries up because they no longer buy hardware from company
7) CEO panics, has massive layoffs
8) New CEO looks around and sees that company no longer has a product to sell