Pure Storage layoffs signal turbulence in IT market

Pure Storage layoffs mark the latest sign of distress to surface in the U.S. IT sector.

The all-flash storage pioneer confirmed it enacted a round of layoffs this week as part of a strategic "rebalancing" of its workforce. The cuts come on the heels of strong sales. Pure Storage last quarter posted revenue of $492 million, up 17% to beat the Wall Street consensus. Pure last week introduced a major revamp of its flagship Pure Storage FlashArray//X block array, which scraps SAS SSDs in favor of custom NVMe over Fabrics flash modules.

According to its latest securities filing, Pure ended the Jan. 31 quarter with 3,350 employees. The vendor has been adding new salespeople in the last year in an effort to widen market share in external storage systems. The vendor did not disclose the number of layoffs, but Barron's reported the cuts affected 3% of Pure's overall headcount, or about 100 people. A post in online message board TheLayoffs.com pegged the figure at 4% and claimed the cuts affected people in marketing, sales and support.

The Pure Storage layoffs will "align our employees with company priorities and areas that are strategic to the business," the company said in a statement.

Job cuts have swept across Silicon Valley in recent weeks. Semiconductor maker Marvell slashed about 100 jobs in January. Google Cloud laid off 50 people and VMware jettisoned more than 200 employees.

Analysts say Pure's cautious stance reflects industrywide concerns stemming from China's economic slowdown and worsening fears over the new coronavirus.

Dell Technologies last week reported a 7% drop in annual revenues, including a steep drop in server sales and 3% decline in storage. File vendor NetApp in February said storage revenues were off by 10%.

"All the vendors are guiding down for the year. In Pure's case, the guidance is still pretty strong for the rest of the year. I'd be more worried if Pure Storage announced layoffs and revised guidance. That would send a bad message," McDowell said.

Pure's revenue guidance for the current quarter is $365 million. Although below expectations, the figure would represent a 12% hike year over year.

For its most recent quarter, Pure Storage said product revenue jumped 11% year over year to $377 million. Revenue from subscription-based storage services skyrocketed 41% to $116% million. More than 1,700 new customers were added, bringing Pure's total to more than 7,500 enterprises, including 44% of the Fortune 500.

For the full year of 2020, Pure generated $1.6 billion in revenues -- up 20% over 2019. However, its loss from operations totaled $191 million, increased from a $169 million loss in 2019.

Pure is encouraging its laid-off employees to apply for other jobs in the company and has set up support for people to make career transitions.