Posted by: Peter Burrows on February 11, 2009
Dan Warmenhoven is an ebullient, optimistic fellow. So when he was preparing to advise employees a few days ago that he was going to have to fire 530 of them, he went to the website of the government’s Bureau of Economic Analysis to find at a scrap of promising economic news to share with the troops as well. “I spent about an hour, and I couldn’t find a single thing. Nothing.”
That’s got one of tech’s most reliable growth companies planning for a very long, slow slog back to economic health. The downturn has surely been steep. He says the first three weeks of this year were essentially barren of sales, leading to a $50 million shortfall of orders. That contributed to a big top-line miss this quarter. Wall Street wanted $910 million. He gave them just $746 million.
But the recovery will be very slow—if you can even call it a recovery. He seems to agree with Microsoft CEO Steve Ballmer’s contention that the economy has essentially “reset” itself to a lower level. He says that in the quarter, sales to his 40 largest (and typically, most reliable) customers fell 20%. The company raced and somehow grew its new account business by 16%—but couldn’t make up for the shortfall.
Now, having very little feel for the business outlook, Warmenhoven is assuming the company will not grow for a while. And he points out that even if a company like NetApp was able to show a point or two of growth by the fourth quarter of this year, it would take that company years just to get back to the levels they were at last Fall.
I asked Warmenhoven, who has been running the company since 1994, whether he wanted to sign up to stay at the company for this protracted period. “Before I turn over the [CEO] title, I want to be sure the future is predictable. Right now, we cannot forecast our future. We don’t know if it’s going up or down, and it’s not fair to ask a new CEO to take over when there’s that much uncertainty.”