Flash startup Tegile slashes global headcount in pre-IPO cost cutting


Layoffs are a regular occurrence in the cutthroat world of enterprise technology, though the bearer of bad news is usually not a startup boasting triple-digit annual sales growth. Tegile Systems Inc. this week revealed that a sizable portion of its overseas staff has been terminated in what appears to be an attempt at deflecting the global economic troubles blamed for dragging down the competition.

EMC Corp., the industry’s largest storage vendor, saw the three percent increase in worldwide demand for its systems last quarter completely nullified by the depreciation of foreign currencies against the dollar. Much the decline happened in Europe, the Middle East and Africa, the same region that was targeted in Tegile’s downsizing initiative. According to The Register, the flash array maker halved its UK headcount and shuttered a branch office in the Netherlands that was opened just a few months ago.

Marketing vice president Rob Commins indicated to the publication that the savings from the cuts should more than offset the impact on Tegile’s revenue growth given that Europe accounts for “well below” a tenth of its sales. And the positive side of the restructuring grows even bigger when taking into account the fact the company will now be able to spend the resources previously taken up by remote workers in more profitable areas . However, the timing of the layoffs gives reason to believe that streamlining operations wasn’t the only motivation behind the move.

The cuts come only a few short weeks after Tegile replaced long-time CFO Ian Edmundson with Michael Morgan, an industry veteran who helped take two companies public. Tegile CEO Rohit Kshetrapal has openly stated that he intends to move down the same road within the next 18 to 24 months, which will require putting forth a solid balance sheet for prospective investors. The more unnecessary expenses the firm trims on the way there, the more attractive its pitch will become.

The fact that the cost-cutting effort has already begun suggests that more layoffs may follow as Tegile moves closer towards its stock market debut. The company will need every dollar that its new CFO can eke out in order to avoid the fate of fellow flash vendor Pure Storage Inc., which saw its share price fall nearly 20 percent since entering public trading last October due to its high burn rate.

Photo via Geralt