At Websense, Layoffs and Executive ShakeupBy Ericka Chickowski | Print
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The company plans to cut 5 percent of its roster in order to adjust to the slumping economy and brings on former Panda Security executive to run sales.
After a tough earnings call last week, Websense announced yesterday that it plans to cut 5 percent of its roster in order to adjust to the slumping economy.
"We have been aggressively managing our expense structure during the recession without any reduction in personnel costs," said Kate Patterson, vice president of corporate communications and investor relations at Websense, in a statement. "The recession has continued, and based on our outlook for the second half of the year, it is now necessary for us to take additional measures to reduce expenses."
The San Diego-based web security firm last week announced a net profit of $3.1 million or 7 cents per share, but the results were actually a disappointment to Wall Street. Analysts with Thomson Reuters had expected Websense to post a 31 cents per share profit last quarter.
The company reported that year-over-year billings for second quarter declined by about 6 percent, down to $82.2 million.
"Our billings shortfall in Q2 was driven by customers under pressure from the recession," said Doug Wride, Websense COO, during the company’s earnings call on Friday. "There were customers in financial distress who either did not renew on a timely basis or reduce(d) their contract duration for their seats. This impacted our renewal billings."
Wride said Websense believes the combined effect on billings from distressed customers was about $11.5 million. In spite of this pressure and Websense missing its projections, the company has done a lot to position the company for recovery once the economy picks up, he said.
"We have demonstrated financial discipline so far this year and we'll continue to do so in the coming months," Wride said. "While this quarter ended up being a challenging one, we are taking steps we can to address the weakness we saw in the renewal base, but we expect the distress caused by the economic environment to continue. The economy will improve at some point and we intend to emerge in a strong position.
During the call Websense also announced an executive leadership shake-up that likely explains the cuts this week. Most prominent among the moves was the installation of former Panda Security executive Didier Guibal as executive vice president of worldwide sales and Art Locke as chief financial officer.
"Art has a great background in business intelligence at his old home at MicroStrategy and this more detailed understanding of our business will help us optimize investment, improve operational efficiency, and continue to tightly control costs," said Gene Hodges, Websense CEO, in the Friday analyst call.
Wride that he would be slowly phasing himself out as COO, handing off many of his responsibilities to Guibal, Locke and president John McCormack by the end of the year. The move surprised analysts, who asked Wride why the company is shifting his role only six months after he took the COO position.
"It's a matter of finding what is the right role for me," Wride replied. "How can we leverage we as a company, leverage me and my experience and knowledge of Websense in a non-CFO role. And that's what we are looking to do. We are just being upfront with the transition that we see."
It is still unclear how Guibal’s arrival will affect channel strategy. It appears that the company intends to retain David Roberts as senior vice president of the Americas. Roberts has largely been responsible for whipping into shape Websense’s channel program since his arrival at the company in 2006.
Despite the shakeup, Websense partners are committed and consider the financial weakness just a sign of the times.
"We’re seeing it all over the place. It’s not like Websense is the only company facing shakeups," says Doug Sloan, senior account executive for Newport Beach, Calif.-based Dyntek. "Websense has a great product, we really like 'em and our customers really like 'em. It’s just kind of the way things are going with the economy right now."
According to Sloan, he’s been unable to close a single Websense deal of merit all year, as many customers have place the company’s product within the 'nice-to-have’ category—along with a lot of other security products."It’s not just Websense," he says. "I talk to end users and they’re saying, 'If it’s not critical or necessary, it’s not happening.’ I’m thinking, 'That’s not critical?’ But that’s how it is."