The phony recession war is over and the first real storm cloud has hit the storage industry. Pillar Data has laid off 150 employees - that's 30 per cent of its workforce - to help it survive the recession.
Pillar Data is a tier 2 storage array company along with 3PAR and Compellent, both of whom have just reported their first profitable quarters. Larry Ellison's Taco Ventures funds Pillar which is still, technically, a startup, although it now has 420 customers in 16 countries. Pillar spokesperson Chris Drago said Larry Ellison supported the management action.
This is the first storage industry company to take such action that isn't known to be in dire financial shape, meaning it isn't Overland Storage, Plasmon, or Tandberg. We might estimate that Pillar could save around $5m a year in staff costs through this cut, depending upon the average salary of the laid-off workers. Let's hope they find alternative employment as quickly as they can.
Was CEO Mike Workman seeing projections of $5m negative net income over the next twelve months? Cutting thirty per cent of the employees in a 500-person company is a pretty deep cut to make.
He wrote in his blog: "Pillar is anticipating a tough economic climate will persist throughout 2009 and into 2010, so we have decided to batten down the hatches and lay off some of our employees. These decisions are always among the toughest decisions a CEO has to make."
He's anticipating the recession lasting through 2009 and into 2010. That's a rough ride ahead. He added: "... our long term viability is ensured by prudent financial actions such as these. ... At the end of the day, I am sorry to say we are in a long line of companies doing the same thing to protect their customers and shareholders. But good management teams prepare for the worst, and drive for the best, and I am happy to say that Pillar is no different."
A sub text is that every storage company CEO is into cash conservation now, or should be. If this is going to become common storage industry practise, that is 30 per cent lay-offs, then we're in for a really bleak 2009. ®