WorldStor Slashes Headcount

Storage service provider WorldStor Inc. this week slashed just under half its workforce, or approximately 30 employees, in an effort to refocus its business.

WorldStor cut jobs across the board, according to a senior member of the companys marketing staff, who also lost her job. There are around 50 employees left.

The company now intends to focus on selling data recovery and management services to enterprises, rather than to Internet data center providers like PSInet Inc. (Nasdaq: PSIX) and Exodus Communications Inc. (Nasdaq: EXDS), both of which have filed for Chapter 11 bankruptcy protection (see Exodus: What's Next?).

Sadly, WorldStor's not alone. Almost every SSP with a leg left to stand on is biting the bullet to reduce headcount, some more openly than others (see Job Axe Swings at Storage Startups, What's Up With Sanrise?, and SSPs Switch to Selling Software).

People familiar with the SSP market say they're not surprised that most are struggling to stay afloat. SSPs must incur massive capital costs to get started, including the expense of leasing fiber optic lines and installing storage vaults. On top of this, the business hasn't come in as fast or as strongly as many startups predicted, which has left the majority verging on bankruptcy (see StorageNetworks: Big Layoff).The situation's been exacerbated by the sheer number of SSPs that entered the market at the same time and have been competing for the same customers. Almost $600 million in venture capital has been sunk into 20 or so SSP hopefuls over the past 18 months (see Venture Capital Survey).

”It’s basically the CLEC, BLEC, MSP, ASP markets all over again,” says James Berlino, analyst with Merrill Lynch & Co. Inc. These were the first victims of the telecom recession, he notes, but it looks like many of the SSPs will follow.

— Jo Maitland, Senior Editor, Byte and Switch http://www.byteandswitch.com