Egenera lays off 87 workers, refocuses on software

Blade server and virtualization management vendor Egenera has laid off a reported 28% of its workforce after deciding to focus most of its energy on selling software through indirect channels rather than tied to its own hardware.

Egenera produces BladeFrame blade servers and PAN Manager virtualization software, which provides a single point of control over physical and virtual servers along with software, storage and data networks.

(View a slideshow on the most notable layoffs of 2008.)

This software was originally tied to Egenera's BladeFrame hardware, but "Pan Manager was freed earlier this year and is currently distributed by Fujitsu-Siemens and Dell," Forrester Research analyst James Staten notes in a blog posting.

Staten applauded Egenera's strategic shift, while noting it was spurred in part by economic necessity. Egenera, which is based in Marlborough, Mass., and has operations in Hong Kong, Japan and the United Kingdom., reportedly laid off 87 people – 28% of its global workforce.

"While certainly the economy has some connection to Egenera's cost-cutting moves, the underlying strategic change is more telling of the company's leadership, new direction and focus on PAN Manager, which stands a good chance of being a hardware and hypervisor independent virtualization manager worth of enterprise IT Ops' attention," Staten writes.

Egenera CEO Mike Thompson expects a "fairly dramatic economic slowdown" and is reducing expenses in response to customers cutting their own IT spending, according to the Boston Globe. Relying on third-party hardware vendors to sell its virtualization management software allows Egenera to reduce its sales force.

Egenera planned to go public back in 2005, when it was focusing mostly on blade servers, but dropped its IPO plan because of unfavorable market conditions.  

Egenera said it will continue to support and enhance BladeFrame, but it is seeing success with PAN Manager in investment banks, healthcare companies and other businesses with demanding IT environments, according to Staten. PAN Manager supports multiple hypervisors including VMware and Xen, and runs on traditional rack or blade servers, he notes.

"As is often the case for hardware companies, Egenera's crown jewels are in this software and PAN Manager is one of the most mature, feature rich and enterprise tested of the virtualization software managers on the market," Staten writes. "Since software is sold more effectively via the indirect channel (through distributors, OEMs, VARs and resellers) Egenera is able to downshift its more costly direct sales efforts by focusing on software sales going forward."