NetApp lets go 8% of its workforce in cost-cutting push

NetApp lets go 8% of its workforce in cost-cutting push

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Data management provider NetApp Inc. today announced plans to let go about 960 employees, or 8% of its global workforce.

The move comes two months after the company projected that its next quarterly earnings results will fall short of expectations. At the end of November, NetApp stated that it was expecting to generate $1.525 billion to $1.675 billion in revenue during the quarter ended Jan. 28. The consensus analyst estimate projected revenues of $1.71 billion.

The job cuts come amid a broader wave of layoffs in the tech industry. Microsoft Corp., Cisco Systems Inc., Google LLC and other major players in the enterprise technology market have also announced workforce reductions since the start of the year. 

“Today is undoubtedly a difficult day,” Chief Executive Officer George Kurian wrote in an internal memo to employees. “The necessary steps we are taking to strengthen our competitive posture and enable us to emerge from this season better than we were before do not overshadow the impact that an action such as this has on our team.”

NetApp expects to complete the workforce reduction by April 29, the end of its current fiscal year. The company estimates it will take a charge of between $85 million and $95 million in connection with the layoffs.

San Jose, California-based NetApp is a major provider of on-premises data storage systems. The company primarily makes all-flash arrays, which offer significantly faster performance than traditional disk appliances. Its top-end AFF arrays are used to run data-intensive workloads such as artificial intelligence applications and analytics tools.

NetApp’s all-flash arrays account for the bulk of its sales. However, the company’s revenue growth is driven primarily by its public cloud business. The latter business sells software that organizations use to manage their cloud-based data storage environments.

The annualized revenue run-rate, or ARR, of its all-flash arrays reached $3.1 billion in its second fiscal quarter after growing 2% year-over-year. The ARR of its public cloud business jumped 55%,, to $603 million, in the same time frame. 

At the center of the company’s growth strategy is Cloud Volumes ONTAP, a cloud edition of the operating system that powers its on-premises flash arrays. Amazon Web Services Inc., Microsoft Corp. and Google LLC offer managed versions of the software in their respective cloud platforms. 

NetApp’s growth strategy also includes other components. In 2020, it reportedly spent $450 million to acquire Spot, a startup that developed software for reducing companies’ cloud infrastructure costs. It has since used Spot’s technology to build an extensive suite of products for managing cloud environments.

More recently, NetApp last November introduced a new software-as-a-service platform called BlueXP. The platform enables administrators to manage cloud-based data storage environments and on-premises flash arrays through a centralized console.

“NetApp continues to be uniquely positioned to help our customers with the industry’s best storage, data, and cloud operations solutions,” Kurian wrote today in the internal memo to employees. “We have a strategy built on a foundation of trusted customer relationships, industry-leading innovation, and unmatched partnerships with all the leading public cloud companies.”

The company expects to close its 2023 fiscal year ended April 29 with adjusted earnings of $5.30 to $5.50 per share. It’s also projecting revenue growth of between 3% and 5%. NetApp’s public cloud business is expected to grow at a significantly faster rate and achieve an annualized revenue run-rate of $700 million, up from $505 million at the end of the company’s 2022 fiscal year. 

Photo: NetApp

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