Thoughts on the Unify Cuts

by Dave Michels

Last week Unify announced a major “restructuring” that will eliminate about 3800 jobs. That’s nearly a 50 percent cut which will leave about 3900 employees. The cuts will occur over six quarters. In an analyst briefing, CEO Dean Douglas said the cuts, a difficult decision, are necessary to make way for innovation and transformation. Douglas explained that the new leadership team of Unify intends to transform Unify to a software-first, channel oriented company that leverages industry transitions such as cloud and virtualization. Douglas believes that the current Unify is inappropriately focused on TDM, hardware, and direct sales.

Here are some of my thoughts on the announcement:

  • A layoff of 50 percent seems drastic. I can’t recall anything like this in UC. It seems that Unify’s headcount has been in a steady decline for years. 2006-2008, when Siemens AG was looking to sell the unit, it had reduced staffing by 6800 employees. In 2008, Siemens Enterprise was created with 51% ownership stake by Gores Group. At that time, the new firm had 15,000 employees (including Enterasys). The Enterasys division was sold last September (with 900 employees) to Extreme Networks.
  • Fifty percent of the cuts will be in “Central Europe” – presumably Germany. The company also wants to evaluate moving its headquarters out of Munich. Neither of these are trivial undertakings with organized labor and Germany’s protective legislation.
  • While a 50% reduction is huge (and painful), 3900 employees may be a reasonable target. Mitel/Aastra, for example, has about 3600 employees and according to data from T3i held slightly higher world enterprise market share in 2013.
  • Unify has gone through significant recent change. Six months ago it rebranded from Siemens Enterprise to Unify. Last September it sold off Enterasys. Last January it got a new CEO. Today, its leadership team consists of 11 executives, of which only one has been there more than seven months.
  • Speaking of leadership, the company has a new leadership team, but many of them have worked together before. Dean Douglas worked at both IBM and Westcon. He’s hired several from both companies.
  • The new Unify strategy uses the same terms we have heard from most of Unify’s competitors over the past five years: Software-based, virtualization, channels, OpEx, cloud, social, WebRTC, collaboration, intuitive, experience-focused, and SaaS.
  • Central to the strategy is Ansible. I suspect the entire back-room is working on Ansible.
  • Focusing on the channel makes a lot of sense – and four executives from Westcon will help. Unify had a good channel, but things got screwed up a few years back when Unify introduced direct sales (channel conflict) and blew up its verticals. Channels are very difficult to build when the product doesn’t exist or isn’t proven.
  • At Wainhouse, we published a new type of report called a Market Presence forecast. The report looks at 10 UC vendors, and attempts to predict which of them (compared to today) will have a stronger, weaker, or neutral market presence in five years. To determine this we looked at several factors including momentum, leadership, the mix of products, and more. Three vendors were identified as increasing presence. Unify was identified as one of three companies in the decreasing category. The report was published before Unify’s announcement.
  • The leadership team and owners, like Wall Street, don’t seem to be valuing the core business. The primary leverage that will improve valuation is software and scalable services.
  • The other predictable play here is aggressive FUD from the competition. Especially for the rest of this year because Ansible isn’t yet shipping (only 300 beta users). That means even Unify’s own dealers will be upselling competitive solutions into the base. Expect some OpenScape targeted incentives and promotions.

Will it Work?

Everything that Douglas is doing is right, but it’s a bit late and subsequently a bit drastic. It’s virtually impossible at this point to “get ahead” of Clo/So/Mo and software transitions. On the positive side, Ansible is getting highly favorable responses. The bigger problem is Ansible is targeted to enterprises which are reluctant to adopt new technology. That means it could take years for Ansible to build acceptance and momentum. During that time, competitors will imitate its most beloved capabilities.

However, if Douglas maintains profitability, sheds the hardware, reduces headcount to a nimble organization, and develops a truly innovative communications platform – I can see big firms (Google, Oracle, HP, IBM) swooning to acquire – that could be good for customers, Unify execs, and investors.