StorageNetworks Announces Q2 Results, Staff Cuts

StorageNetworks Inc. this week announced revenues of $33.4 million for the second quarter ended June 30, a 23% increase over revenues of $27.1 million in the first quarter of this year and a 318% increase over revenues of $8.0 million in the second quarter last year.

However, citing a slowdown in IT spending, longer sales cycles and a reduction in backlog, the company said it would reduce its revenue guidance for the year and reduce its staff by 220 employees primarily in its sales, delivery and support organizations.

“I am pleased with our second quarter results in terms of revenue growth, gross margin improvement, EBITDA loss, and net loss per share,” said Peter Bell, StorageNetworks’ chairman and CEO. “Despite this quarter’s strong financial performance, signing of key new customers, immediate traction of our newest service offering STORfusion, and the interest our services are receiving in enterprise companies, we are disappointed at the speed of which new bookings are occurring. We recognize that the challenging macroeconomic environment has caused a worldwide slowdown in information technology spending. Today, companies are taking longer to make purchasing decisions because of this challenging economic environment.”

“While we are disappointed that we are required to adjust revenue guidance downward, we have every intention to deliver upon our profitability targets that we have provided guidance on in the past, and accordingly we are aligning our cost structure with our revenues, said Paul Flanagan, StroageNetworks executive vice president and chief financial officer. As a result, we streamlined the sales, delivery and support organizations, reducing our headcount by approximately 220 employees bringing our total headcount to 450. Given these organizational changes, I feel confident that we will achieve gross margin profitability in the third quarter of this year, one quarter ahead of previous guidance. In addition, with $350 million in cash, and $35 million of available financing, we have sufficient funding to achieve operating profitability.”