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NetApp to cut 6 percent of staff as storage competition grows
In a sign of cloud computing’s growing disruption of the technology industry, NetApp Inc. is already gearing up for another restructuring just two months after completing its last round of job cuts.
The storage giant revealed plans to lay off 6 percent of its workforce, or about 640 employees, in a filing submitted to the U.S. Securities and Exchange Commission on Thursday. NetApp general counsel Matthew Fawcett wrote that the initiative is expected to incur a charge of $50 million to $60 million and will be completed by the end of the year. For comparison, the previous cuts set the company back $60 million to $70 million while costing some 1,500 staffers their jobs.
NetApp, which reports quarterly earnings Nov. 16, in August delivered a 3 percent drop in sales in its first fiscal 2017 quarter, to $1.29 billion, incurring a loss of $64 million, more than double a year ago.
NetApp’s paperwork states that both the workforce reductions were launched with the goal of streamlining its “core business,” which presumably refers to the data center storage division. The layoffs come amid increasing competition from rival array makers such as Dell Technologies Inc. that are retooling their systems around solid-state memory. NetApp also joined the fray last November by acquiring flash startup SolidFire Inc. for $870 million, but a big portion of its revenues still comes from traditional disk-based products.
Other hardware companies such as Hewlett-Packard Enterprise Co. and Cisco Systems Inc. have also laid off significant staff this year. Besides competition within storage hardware, they’re also all suffering from the incursion of public cloud leaders such as Amazon Web Services and Microsoft Azure. Companies are moving computing and storage work to the cloud, leaving less demand for traditional information technology hardware and software.
Staff at NetApp’s storage division can expect more changes as the management team continues investing in its all-flash product line. NetApp is also starting address the growing amounts of data that customers are moving to the cloud, which is emerging as an equally important competitive trend. The company introduced a new software as a service offering on Tuesday as part of this effort that makes it possible to directly back up data from its systems to AWS.
Image courtesy of NetApp
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