Network Equipment Technologies (NWK) Announces Plans to Restructure, Looks to Cut 25% of Employees
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Network Equipment Technologies, Inc. ("NET") (NASDAQ: NWK) announced today that it had begun implementation of a restructuring plan that it expects will reduce annual operating expenses, simplify its organization, and refine operations.
"Our goal has been to return the company to profitability as quickly as possible. Throughout the last few quarters, we have been carefully balancing between aggressive investing in research and development and managing costs," said Nick Keating, President and CEO. "Now that we have achieved some of our major new product initiatives, with the general availability of both our UX1000 and UX2000 products, we feel that we are well poised to address the markets we've identified for future growth. However, given our current economic realities, including the continued decline in our Federal business, we have sought to examine how we can more significantly reduce our expenses in order to preserve our capital resources and accelerate a return to break-even operations. We have taken a hard look at our various business units, with an eye to focusing our efforts on the biggest opportunities ahead of us. We have also looked for ways to streamline operations throughout the company, including reductions of headcount-related expenses, vendors and contingent staff, facilities, capital expenditures, and marketing."
The company is identifying a range of cost-savings measures to be implemented or become effective during calendar 2012 that it believes can reduce its operating expenses by up to $18 million on an annual basis. By the end of the current quarter, the company expects to achieve annualized savings reflecting close to half of that total as a result of various changes, including the elimination of positions and headcount reductions as well as changes to some third-party service arrangements. Further initiatives that are being evaluated for implementation during the year include subleasing of surplus real estate, non-renewal of certain contracts, and greater efficiencies in our production processes.
In the current quarter, the company is eliminating positions and reducing its headcount by approximately 50 employees, which, after restructuring charges, will result in net cash savings beginning in the current quarter. The company estimates that it will incur restructuring charges with respect to such headcount reduction, for severance and termination benefits, in an amount not expected to exceed $1 million (all of which will be cash expenditures). The company anticipates further headcount reductions during the year, including through attrition, aggregating to approximately 25% of its global workforce as compared to the beginning of the year.
The company will report on additional cost reductions during the year as it implements or commits to those elements of its restructuring, and may incur additional restructuring charges as various initiatives are implemented. In addition to the restructuring plan, the company is exploring alternatives to add to its capital resources.
"Our action today is difficult, but necessary considering recent financial results and current business realities. We have sought to make cuts judiciously in order to maintain our capabilities to address the growing markets of unified communications (UC) and enterprise session border controllers (eSBC), supporting leading global partners for distribution, sales channels and technology. Today we have over 200 active global 5,000 UC customers and are adding new customers every quarter. As the UC landscape quickly evolves, so must our business, and we must continue to transform our organizational structure to one that works for today. The cost-savings measures taken today will help preserve our ability to deliver the upcoming hardware and software features for the UC and eSBC markets," said Keating.
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"Our goal has been to return the company to profitability as quickly as possible. Throughout the last few quarters, we have been carefully balancing between aggressive investing in research and development and managing costs," said Nick Keating, President and CEO. "Now that we have achieved some of our major new product initiatives, with the general availability of both our UX1000 and UX2000 products, we feel that we are well poised to address the markets we've identified for future growth. However, given our current economic realities, including the continued decline in our Federal business, we have sought to examine how we can more significantly reduce our expenses in order to preserve our capital resources and accelerate a return to break-even operations. We have taken a hard look at our various business units, with an eye to focusing our efforts on the biggest opportunities ahead of us. We have also looked for ways to streamline operations throughout the company, including reductions of headcount-related expenses, vendors and contingent staff, facilities, capital expenditures, and marketing."
The company is identifying a range of cost-savings measures to be implemented or become effective during calendar 2012 that it believes can reduce its operating expenses by up to $18 million on an annual basis. By the end of the current quarter, the company expects to achieve annualized savings reflecting close to half of that total as a result of various changes, including the elimination of positions and headcount reductions as well as changes to some third-party service arrangements. Further initiatives that are being evaluated for implementation during the year include subleasing of surplus real estate, non-renewal of certain contracts, and greater efficiencies in our production processes.
In the current quarter, the company is eliminating positions and reducing its headcount by approximately 50 employees, which, after restructuring charges, will result in net cash savings beginning in the current quarter. The company estimates that it will incur restructuring charges with respect to such headcount reduction, for severance and termination benefits, in an amount not expected to exceed $1 million (all of which will be cash expenditures). The company anticipates further headcount reductions during the year, including through attrition, aggregating to approximately 25% of its global workforce as compared to the beginning of the year.
The company will report on additional cost reductions during the year as it implements or commits to those elements of its restructuring, and may incur additional restructuring charges as various initiatives are implemented. In addition to the restructuring plan, the company is exploring alternatives to add to its capital resources.
"Our action today is difficult, but necessary considering recent financial results and current business realities. We have sought to make cuts judiciously in order to maintain our capabilities to address the growing markets of unified communications (UC) and enterprise session border controllers (eSBC), supporting leading global partners for distribution, sales channels and technology. Today we have over 200 active global 5,000 UC customers and are adding new customers every quarter. As the UC landscape quickly evolves, so must our business, and we must continue to transform our organizational structure to one that works for today. The cost-savings measures taken today will help preserve our ability to deliver the upcoming hardware and software features for the UC and eSBC markets," said Keating.
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