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Unify Layoffs, Restructuring A Bit Late and Subsequently A Bit Drastic

**Editor’s Note: Click here for a recap of layoffs impacting some of the biggest names doing business in the indirect channel.**

Last week, Unify, the former Siemens Enterprise Communications, said it will lay off half of its workforce as it moves away from TDM, hardware and direct sales. Now, one analyst is calling those 3,800 job cuts “drastic.”

“I can’t recall anything like this in UC,” Wainhouse Research senior analyst Dave Michels wrote in a client brief this week.

The cuts will take place over six quarters.

Unify CEO Dean Douglas, who’s new to the Germany-based company, told analysts in a recent briefing that his new leadership team aims to turn Unify into a software-first, channel-oriented organization. For Unify, mass layoffs are part of achieving that goal. And while 3,800 out of 7,700 people is a “huge (and painful)” reduction, Michels said, employing the remaining 3,900 workers “may be a reasonable target,” Michels said.

“Mitel/Aastra, for example, has about 3,600 employees and according to data from T3i, held slightly higher world enterprise market share in 2013,” he said.

Michels further pointed out that Unify’s headcount has declined in steady numbers for years.

“In 2006-2008, when Siemens AG was looking to sell the unit, it had reduced staffing by 6,800 employees. In 2008, Siemens Enterprise was created with a 51 percent 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,” Michels said.

The latest job losses come on the heels of significant changes within Unify over the past year. The company last October rebranded from Siemens Enterprise Communications, then, a couple months later, performed a clean sweep of its executive team. Only one of the 11 people in charge has been at the company for more than seven months. Further, Unify sold Enterasys.

Now, with those folks at the helm, Unify not only is initiating layoffs, it’s also amping up its focus on the channel. “We’re pretty much going to stop selling direct,” Jon Pritchard, Unify’s new channel chief, told Channel Partners.

Michels said that’s a smart move, but there are some potential pitfalls – both for partners and for Unify’s financials.

“Focusing on the channel makes a lot of sense — and four new executives from Westcon will help,” he said. “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. Yet the leadership team and owners, like Wall Street, doesn’t seem to be valuing the core business. The primary leverage that will improve valuation is software and scalable services.”

To be sure, the job cuts and restructuring all are meant to place emphasis on Unify’s work in

unified communications and subscription-based products, rather than legacy hardware. Central to that strategy is Project Ansible, the cloud-based, WebRTC-centric UC platform that was slated for a summer release but has been pushed out to October. But because Project Ansible has yet to ship, Unify’s software shift could be disrupted.

“Even Unify’s own dealers will be upselling competitive solutions into the base,” Michels said. In the meantime, he added, “Expect some OpenScape-targeted incentives and promotions.”

On the whole, everything Douglas is doing is right, said Michels. Still, “it’s a bit late and subsequently a bit drastic. It’s virtually impossible at this point to get ahead of cloud/social/mobile and software transitions.”

However, if Douglas makes the right decisions that maintain profitability, “I can see big firms (Google, Oracle, HP, IBM) swooning to acquire — that could be good for customers, Unify execs, and investors.”


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