Egenera laying off workers in Bay State
Marlborough firm's cuts reflect wariness in high-tech sector
Business software maker Egenera Inc. notified employees yesterday it will eliminate 87 jobs worldwide, including 30 to 35 at its Marlborough headquarters, in the latest sign that Massachusetts technology companies are bracing for a worsening economic downturn.
Egenera said it will trim its sales force about 40 percent by shifting its model to rely on hardware vendors like computer maker Dell Inc. to market Egenera's software to businesses. Until now, the company has sold software directly to business customers in the United States.
"We're prepared for a fairly dramatic economic slowdown," said Mike Thompson, Egenera president and chief executive. "We've seen signs of a slowdown in the past year, so we dialed back our expenses. Now when we talk to our customers around the globe, we're seeing the slowdown almost across the board."
Egenera sells "virtualization" software, technology that enables one networking machine in a corporate data center to behave as many, running different operating systems at the same time. Its customers include hundreds of financial, healthcare, manufacturing, service, and retail businesses in the United States and worldwide. But in the third quarter, ended Sept. 30, all of its domestic orders came from federal agencies, as businesses scaled back on information technology spending, Thompson said.
Other Massachusetts technology companies, which had hoped to escape the fallout from an economic crisis originating in the housing and financial sectors, also have begun cutting payrolls. California-based THQ Inc. yesterday said it is closing Helixe, a Burlington software studio that makes games for the Nintendo DS handheld videogame system, eliminating 30 jobs.
Plexus Corp., a maker of printed circuit boards, told the state's Executive Office of Labor and Workforce Development last month it will be closing a plant in Ayer between now and Jan. 31, idling 170 workers. ACT Electronics Inc. indicated it would close a Hudson electronic assembly plant on Nov. 28, shedding 27 jobs, according to a published report.
Tewksbury's Avid Technology Inc., a maker of video editing software, recently said it's laying off 54 workers in Massachusetts and 20 in New Hampshire. And at least three dozen Verizon Communications engineers in Massachusetts and Rhode Island will lose their jobs this month as part of a broader retrenchment at the telecom company.
The uncertain environment is making companies anxious about keeping costs in line with projected sales, analysts said.
"There is a discontinuity taking place where the normal market behavior ceases to exist," said Roger L. Kay, president of research firm Endpoint Technologies Associates in Wayland. "Some of it is just caution, not wanting to have a lot of expenses if volume declines. All the fixed costs come under scrutiny, from inventories to payrolls."
Egenera, backed by venture capital, was founded in March 2000 by Vern Brownell, a former chief technology officer at the Goldman Sachs & Co. investment bank. While it initially focused on selling blade servers, computing machines that carried more processing power in less rack space, it has gradually transitioned in recent years to virtualization software, a new technology that enhances the efficiency and flexibility of computer servers, storage, and networking gear.
While the company previously had marketed its software overseas through partners like Digital China and the Fujitsu Siemens joint venture, it had sold directly to end users in the United States. By switching to an indirect sales channel, Egenera can reduce its sales force, Thompson said. The company will retain some of its direct sales people to continue serving existing customers, he said.
Thompson said Egenera hopes to eventually go public in an initial public offering, but he conceded the IPO market is frozen for now as fear dominates financial markets. "There's no IPO market today," he said. "So we're going to weather the storm until there is one."
Globe staff reporters Hiawatha Bray, Todd Wallack, and Erin Ailworth contributed to this story. Robert Weisman can be reached at weisman@globe.com. 