Xiotech Regroups

Xiotech Corp. has regrouped, eliminating an unspecified number of employees in the process of rededicating itself to a broader product charter.

The vaguely worded announcement (see Xiotech Reveals Growth Plan) came in the wake of Xiotech's release early this week of the Magnitude 3D 3000, the latest version of the vendor's storage system, which is based on Intel hardware instead of the vendor's proprietary components (see Xiotech Gives Magnitude a Tuneup).

According to Xiotech EVP of worldwide marketing Mike Stolz, the move to commoditized hardware signals a new focus on the "application layer" instead of the underlying SAN appliance. Xiotech will now create more software solutions, he says, such as applications for backup and disaster recovery, compliance, and archiving -- all aimed mainly at SMBs in Xiotech's three main vertical markets of healthcare, government, and education.

As with the rest of the announcement, there are no specifics about the timeframe for release of the new software.

Xiotech's "consolidation of headcount" came about since it didn't need certain folk who used to make the company's own chips. At the same time, Stolz says Xiotech is hiring in other areas. "We're going forward in applications, focusing on integrated solutions for lifecycle management," he maintains.Indeed, Xiotech continues to add on the software side, as evidenced by enhancements to its division in Hyderabad, India (see Storage Firms Take Passage to India). The company also has added an EVP of storage solutions, Kuldeep Sandhu, hired last year with colleague Santosh Lolayekar from Maranti (see Maranti's Minus a CEO and Xiotech Hires Maranti Founders).

Xiotech's been planning a software move for awhile. "When [former CEO Alain Andreoli] visited last year, they were looking to buy software companies," says Kaushik Roy of Susquehanna Financial Group. Xiotech execs said they needed to grow away from the emphasis on hardware, which had become too competitive and low margin, he notes.

The message echoes the recent battle cries of other storage firms such as IBM Corp. (NYSE: IBM), who see IT customers turning away from from hardware/software issues toward broader, solution-based strategies such as those of EMC Corp. (NYSE: EMC).

Xiotech won't answer questions about the cuts, but at least one source close to the company confirms reports that it comprised roughly one fourth of the firm's 400-odd census.

While Stolz says cuts were made across the board, at least one industry analyst, who requested anonymity, says the company has cut a VP of business development, VP of sales, most regional sales managers, and a slew of salespeople and sales engineers.This is confirmed by a source close to the company, who says the sales team has been reorganized from a regional focus into three groups addressing the East, West, and Government sectors of the domestic market.

The changes follow Xiotech's CEO switch earlier this year, in which Casey Powell took the helm from Alain Andreoli (see Xiotech Swaps Out CEO). One analyst says the firm has been doing well, to the tune of over $90 million last year, but continues to lose several million per quarter. The changes, this analyst notes, are part of Xiotech's -- and Powell's -- efforts to gain profitability this year.

Mary Jander, Site Editor, Byte and Switch