Storage Giant NetApp to Lay Off – NetApp, one of the big players in cloud data management, today announced that it would lay off 8% of its staff, citing “macroeconomic challenges and the reduced spending environment” in the current market.
The company is estimated to employ about 12,000 people globally, so this will work out to around 960 people impacted. NetApp said that it would begin the process this quarter and is expected to take a charge of $85 million to $95 million related to that.
We have contacted the company to ask which product lines or types of jobs might be impacted. It looks like the cuts will be in multiple geographies, including EMEA and Asia-Pacific.
Storage Giant NetApp to Lay Off – Netapp Layoff
San Jose-based NetApp is listed on Nasdaq and has a market cap of just over $14 billion. Like a lot of tech stocks, NetApp has seen its shareprice rollercoaster over the last year and overall drop in value over that time.
Businesses are spending significantly less on IT at the moment, and that has been weighing heavily on tech companies that count them as customers. Companies working in cloud services saw a massive surge in demand during the COVID-19 pandemic.
Both from the world simply using more digital channels in their work and leisure activities, but also from businesses investing in so-called “digital transformation” and updating systems to work on newer technologies. NetApp itself made a splashy acquisition of Spot.io for $450 million as part of that push.
But overall, even cloud businesses have not been immune to the more recent downturn, and subsequent drop in demand for their products, too.
“Companies are facing an increasingly challenging macroeconomic environment, which is driving more conservatism in IT spending. We are not immune to these challenges,” CEO George Kurian wrote in a memo to employees today. “Against this backdrop, we must be agile, deliver on our near-term commitments, while positioning ourselves for long-term success.
This means sharpening our strategy to focus on the areas of our business best positioned for growth, adapting our cost structure to reflect focus and market conditions and raising the bar on our performance.
Having successfully navigated similar challenges together with you before, I am confident that sharp focus on our strategy and strong execution will enable us to capture the opportunity ahead.”
Indeed, NetApp is not a stranger to layoffs. In 2016, also under Kurian as CEO, the company laid off first 12%, and then a further 6%, of employees within months of each other. This time around, it is part of a bigger wave of reductions across all of tech, covering not just a number of major enterprise vendors, but those in consumer, too.
Other recent layoffs have been announced at Google (12,000), Amazon (18,000), Groupon (500), SAP (3,000), IBM (3,900) and more. Counting this recent round at NetApp, there have been more than 76,000 layoffs in the technology sector this year alone, according to Layoffs.fyi. That’s a massive and very disconcerting rate. All of 2022 had 159,684, but we’re only two months into the year.
NetApp last quarter beat on both earnings and revenues, and set guidance of net revenues in the range of $1.525 billion to $1.675 billion and non-GAPP earnings of $1.25 – $1.35. Let’s see how the company performs in Q3 when it reports on February 22.
Storage Giant NetApp to Lay Off – Reduced Revenue Forecast
In November, NetApp lowered its revenue outlook for the rest of its fiscal year during its Q2FY23 earnings report for the period ending Oct. 28, 2022. The reduced revenue forecast called for $1.525 billion and $1.675 billion, down from $1.7 billion. In its SEC filing, NetApp said it would take charge of approximately $85 to 95 million for severance costs.
At that point, Kurian said there were already signs of economic headwinds. “As we moved through the [second] quarter, we saw increased budget scrutiny, requiring higher level approvals, which resulted in smaller deal sizes, longer selling cycles, and some deals moving out of the quarter,” Kurian said during the company’s earnings call at the time. “In Q2, we felt this most acutely in the Americas high tech and service provider sectors.”
Kurian noted during that earnings call that NetApp had already instituted a hiring freeze and was reducing discretionary spending. “We will remain disciplined as we continue to shift resources away from lower yield activities to our biggest opportunities,” he said.