CyrusOne Lays Off 12% Of Workforce As Data Center Demands Softens

‘In recognition of the continued moderation in demand from hyperscale customers…believe it is appropriate to reduce our cost structure to more closely align the business with current market conditions,’ says CyrusOne CEO Gary Wojtaszek.

Data center provider CyrusOne is cutting 12 percent of its workforce as the company faces a slowdown in demand from its largest hyperscale customers.

“In recognition of the continued moderation in demand from hyperscale customers, a trend we first identified in late 2018, we believe it is appropriate to reduce our cost structure to more closely align the business with current market conditions,” said Gary Wojtaszek, president and CEO of CyrusOne in a statement.

CyrusOne laid off 55 employees this week as demand for the Dallas-based data center company appears to have softened from hyperscale players – which include the likes of Amazon, Apple, Google, Facebook and Microsoft -- who collectively are spending billions every quarter in building and equipping new data centers across the globe. In the third quarter of 2019 alone, global hyperscale capex spending on data centers exceeded $31 billion.

[Related: Data Center Giant Equinix To Acquire Packet To Drive Edge Computing Capabilities]

In addition to the layoffs, CyrusOne also unveiled news that Tesh Durvasula, president of Europe for CyrusOne, will be leaving the company on March 1, 2020. Durvasula has been with CyrusOne for more than seven years and previously held top marketing positions at the likes of QTS and Telx.

Durvasula will be replaced by Matt Pullen, who is currently managing director of Europe for CyrusOne.

“Since [Durvasula] joined, the company’s revenue has nearly quintupled, we have succsesffuly expanded internationally, and we are now the third largest data center provider in the world,” said Wojtaszek. “I am excited that Matt, one of the original Zenium principals, will now be leading our continuing European expansion, leveraging his extensive experience in the region.”

In terms of the 55 layoffs, Wojtaszek said the cuts will result in “enhanced margins and higher profitability overtime,” while also strengthening CyrusOne’s position.

“We continually evaluate our expense structure and have been very proactive in identifying opportunities to generate efficiencies, which this action further supports,” Wojtaszek said.

CyrusOne said the layoffs will result in $10 million in annual savings. The company’s stock dropped approximately 6 percent since the layoffs were unveiled, trading at $61.89 per share as of Tuesday afternoon.

Last year, reports surfaced that CyrusOne was looking to be acquired with fellow data center provider Digital Realty eyeing the company. However, Wojtaszek said in late 2019 that his company is “not currently pursuing” a sale.

Amazon, Apple, Google, Facebook and Microsoft led the charge in terms of hyperscale operators building new or expanding data centers in 2019, all of which are building hyperscale facilities that house tens of thousands of servers and hardware alongside millions of virtual machines.

CyrusOne operates nearly 50 data centers across the U.S., Europe and Asia. The company is a real estate investment trust that invests in carrier-neutral data centers and provides colocation services. It provides mission-critical data centers that protects and ensures the continued operation of IT infrastructure for approximately 1,000 customers including more than 200 Fortune 1,000 companies.