While new-generation array makers such as Nimble Storage Inc. are growing their revenues in the high double digits on the back of the soaring demand for flash, NetApp Inc. has found itself caught in the backwind. Sales of its traditional disk systems tanked 27 percent in the second quarter on a year-over-year basis to $664 million amid widening customer inertia.

That’s largely due to the technical difficulties of upgrading existing systems to the newest iteration of its homegrown management software, which requires upending complicated processes upon which mission-critical application rely and manually migrate data. The resulting decline in adoption has had the effect of compounding the revenue lost to rivals such as Nimble.

That pressure has translated all the way down to NetApp’s bottom line, which took a beating in the second quarter that left its net profit $30 million in the red compared to $88 million in the same period 12 months ago. But in a small consolation for shareholders, much of that loss is the result of an internal restructuring meant to put the company in a better position to climb out of its death spiral that has already seen 500 layoffs.

Rumor has it that many thousands more will follow in the coming months as NetApp’s top brass works to shed the parts of its business that are inhibiting growth, an effort that insider leaks have revealed could leave its 12,000-strong workforce up to a third smaller at the end of the tunnel. But in spite of the continued costs of downsizing, the company expects its finances to turn around somewhat in the next quarter and bounce back to between 55 cents to 60 cents.

That’s on expected revenue of between $1.4 billion to $1.5 billion, a forecast noticeably higher than analysts expected, which sent its stock climbing after the earnings call. But there’s still a tough road ahead as competition from newer vendors like Nimble intensifies and the fellow members of the old guard, most notably EMC Corp, double down on their own efforts to catch up with the shift to flash storage.

Photo via NetApp