Hewlett Packard Enterprise becomes latest tech firm to leave Silicon Valley

Hewlett-Packard, which was founded in 1939 in a Palo Alto garage, was one of the original Silicon Valley success stories. PHOTO: SCREENGRAB FROM GOOGLE MAPS

SAN JOSE, CALIFORNIA (BLOOMBERG) - Hewlett Packard Enterprise (HPE), formed from one of the founding companies of Silicon Valley, plans to relocate its headquarters to Houston from San Jose, California, following years of waning technology-industry dominance that came with the rise of newer businesses focused on mobile and internet-based computing.

The company said it was already building a "state-of-the-art" new campus in Houston, the fourth-largest US city. HPE also reported quarterly revenue that topped analysts' predictions, suggesting that businesses are upgrading their data-centre hardware during the coronavirus pandemic.

The pandemic, with its work-from-anywhere arrangements, has given a number of tech companies an excuse to exit California, known for its high cost of living, hefty taxes and difficult commute. But HPE's move is particularly notable because Hewlett-Packard, which was founded in 1939 in a Palo Alto garage, was one of the original Silicon Valley success stories, said CNBC.

Data analytics software company Palantir Technologies moved its headquarters to Denver, Colorado from Palo Alto, California, earlier this year, CNBC reported. Dropbox CEO Drew Houston also reportedly decided to move to Austin, while the firm said it will stop asking employees to come into its offices and instead make remote work the standard practice. For employees who need to meet or work together in person, the company is setting up "Dropbox Studios" in San Francisco, Seattle, Austin and Dublin when it's safe to do so, said CNBC.

Twitter and Square are letting employees work from home "forever", while Microsoft said workers will have more flexibility to work from home. Facebook CEO Mark Zuckerberg predicted in May that 50 per cent of employees will be working remotely within the next decade.

HPE CEO Antonio Neri has been working to turn around HPE, a maker of servers, storage hardware and networking gear, which had reported declining revenue in all but one quarter since separating from personal-computer maker HP. Mr Neri is reducing the company's overhead costs, exiting unprofitable businesses and chasing the hybrid-cloud market, in which businesses store and process some of their information in corporate data centres and some with public cloud companies.

Sales in the quarter ended Oct 31 were little changed from a year ago at US$7.2 billion (S$9.6 billion). Analysts, on average, estimated US$6.9 billion, according to data compiled by Bloomberg. Profit, excluding some items, was 37 cents a share in the fiscal fourth quarter, HPE said Tuesday in a statement. Analysts had projected 34 cents.

The spread of Covid-19 and the economic slowdown it triggered had suppressed demand for networking and computer hardware and services. Now that companies have settled into remote work for many employees, they're investing in gear to make that more efficient.

"The global pandemic has forced businesses to rethink everything from remote work and collaboration to business continuity and data insight," Mr Neri said in the statement. "We saw a notable rebound in our overall revenue, with particular acceleration in key growth areas of our business."

Fiscal fourth-quarter sales increased 6 per cent from the prior period. In the current quarter, HPE projected that profit, excluding some items, will be 40 cents to 44 cents. That compares with an average analyst prediction of 35 cents, according to data compiled by Bloomberg.

The company said sales will decline from the preceding period at a percentage in the mid-single digits, in line with normal seasonal patterns. A decline of 5 per cent would indicate sales of about US$6.84 billion. That compares with an average analyst estimate of US$6.63 billion.

The company will keep its technology innovation hub in San Jose, at a relatively new building, CEO Neri said on a conference call with analysts. Administrative work will be centered at the new Texas headquarters. Consolidating more expensive facilities in California will lead to real estate cost savings, he said.

No staff reductions are associated with the move, HPE said in the statement. The company has locations in several cities in Texas, including Austin and Plano, and has more than 2,600 workers in Houston, according to a statement from the office of Governor Greg Abbott.

HPE shares were little changed in extended trading after closing at US$11.20 in New York on Tuesday. They have declined 29 per cent this year.

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