Meru Networks ready to DECIMATE its workforce

Meru Networks has retained financial advisor Deutsche Bank to review future options for the business, as it confirmed its intention to erase “more than” 10 per cent of the global workforce amid falling sales and profits.

The NASDAQ-listed WLAN maker revealed last night that according to preliminary estimates for Q4, revenues will cross the line at $21m to $22m, relatively lighter than previous guidance of $23m to $27m.

To counter this shortfall, a company-wide restructure will “impact every department and geography” Meru said in a statement. The move is designed to cut costs to allow it to reduce break-even from roughly $27m in quarterly revenues to $21.5m to $22.5m by the end of Q1 2015.

Over one in 10 full-timers will get the heave-ho this quarter as will approximately 20 contractors. The one-off cost of this will be between $1.5m to $2m. In 2012, Meru employed around 400 people, but no more up-to-date info has been made available since.

The re-org is expected to consolidate certain functions and flatten the structure to speed bad decision-making.

“We are disappointed with this performance, yet believe that our technology advantages can be converted into greater market adoption,” said president and CEO Bami Bastani.

He said the company will “optimise the mix of channel partners, channel distribution”, which sounds like a euphemism for focusing on the ones bringing home the bacon.

The exec also confirmed Meru will concentrate on “effective direct sales necessary to put the company back on a growth track”.

Kevin Coppins, veep of sales for North America has quit - effective from the start of next week (12 January) - and Tom Palomaki, veep for worldwide support and services has taken over the role.

Years back when the WLAN market was taking off, analysts viewed Meru as being a prime takeover target and it still may, but not for the same reasons.

Meru confirmed it is keeping Deutsche Bank on the books to “explore strategic options”. This includes but is not limited to, “strategic partnering of its technology and possible sale or merger of the company”.

In an open letter to Meru shareholders last May, private equity form Castle Union Partners Lp - which at the time owned 5.7 per cent of the stock - expressed concern over the “consistent underperformance, relative to its enterprise WLAN peers”.

The VC demanded the board begin a sales process as it believed "Meru should not remain an independent company".

According to numbers from IDC, consumer and enterprise WLAN sales grew 7.4 per cent year-on-year in Q3 - the last data available for the sector. However, Mernu did not feature among any of the top five hottest sellers. ®