Auspex Axes 170

NAS vendor Auspex Systems Inc. (Nasdaq: ASPX) today announced 170 layoffs, or a third of its workforce, in a belt-tightening exercise that it says will reduce its operating expenses by approximately $4.5 million per quarter (see Auspex Axes).

Auspex has made several structural changes to streamline its business. In addition to the job cuts, these include a transition to outsourced manufacturing and the use of off-the-shelf parts, as opposed to proprietary components.

Auspex also is discontinuing its NS2K product, although it will continue to support it, to focus on selling its newer NS3K family, which includes three servers.

Auspex officials estimate the severance costs and other related expenses will total $3.5 million. There may be further charges to earnings this quarter, once the full effects of the resizing have been assessed.

Dramatic changes in the storage market as well as the general economic downturn have prompted us to make adjustments to put our expenses more in line with our revenues,” says Mike Worhach, president of Auspex Systems. “We firmly believe that these changes will position us for growth and profitability when the market rebounds.”During its September quarter, Auspex lost 32 cents a share on revenues that plunged to $8.4 million from $16 million for the quarter a year ago. Furthermore, the company had negative gross margins in the latest quarter, a signal that it's been selling its products for less than it costs to make them.

Despite being first to market with NAS products in 1987, Auspex has struggled in recent years as bigger and better-financed companies claimed the market. Network Appliance Inc. (Nasdaq: NTAP) and EMC Corp. (NYSE: EMC) now command a huge chunk of the NAS market, while several other large storage and computer vendors have been making inroads (see Auspex Unleashes a Brat).

Auspex appeared to be staging a comeback in August, with the announcement of new products (the NS3K series) and a leaner (meaner?) management team. But things seem to have a taken another turn for the worse since then (see Auspex).

"It is depressing to let go of staff," says Bob Iacono, VP of marketing. "But if the revenue doesn't meet expectations, something has to give." He says the company's product stategy is still on course.

One hopeful sign for Auspex is an expected upswing in the NAS market. The latest report from Frost & Sullivan, "European Network Attached Storage Market,” reveals this market generated $410 million in 2000 and projects revenues to reach $1.8 billion by 2007 (see NAS Market on the Ups).— Jo Maitland, Senior Editor, Byte and Switch
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