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NetApp Cuts 600 Jobs Worldwide in Reaction to Declining IT Storage Budgets

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Data-storage equipment provider NetApp is scaling its workforce back nearly 5 percent, cutting 600 employees worldwide as part of a “realignment plan.”

According to a Wednesday filing with the US Security and Exchange Commission, 600 NetApp employees will lose their jobs, and the company will be paying around $35 to $45 million towards employee terminations and other costs associated with the business realignment plan. In 2013, NetApp removed 900 employees under pressure investors.

While NetApp disclosed very few details about the realignment plan, it notes that it will help the company “focus its resources on key strategic initiatives and streamline its business in light of the constrained IT spending environment.”

In NetApp’s 2014 Q3 earnings call in February (PDF), the company mentioned declining revenue in the Americas (down 5 percent year-over-year), including US public sector revenue was down 13 percent largely due to tighter federal IT budgets. Even 3 percent revenue growth among its EMEA and Asia-Pacific clients, couldn’t make up the difference.

“You watch the IT spending numbers estimates come down and down and down and I think we see that,” said NetApp president, CEO and director Thomas Georgens. He went on to say, “storage is still very, very highly correlated with overall IT spend. And as IT spend comes down, storage spend comes down with it.”

According to Bloomberg, NetApp’s revenue averaged 22 percent growth over the three fiscal years leading up to 2013, when revenue growth dropped to just 1.6 percent.

NetApp has been known for its storage solutions for new cloud deployments, and its FlexArray virtualization software providing hybrid storage arrays. It’s unclear which part of its business it will be focusing on.

This realignment plan is a gamble for NetApp which is trying to deal with declining revenue amid more competition in the storage space and more conservative IT budgets.

About the Author

David Hamilton is a Toronto-based technology journalist who has written for the National Post and other news outlets. He has covered the hosting industry internationally for the Web Host Industry Review with particular attention to innovative hosting solutions and the issues facing the industry. David is a graduate of Queen’s University and the Humber College School of Media Studies.

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