Minneapolis-based Code42, an IT-security software firm that employs 600 people globally, plans to shed 55 people, or about 9 percent of its workforce.
The firm’s annual revenue growth rate slowed from 25 percent-plus to 17 percent last year. Code42 has moved from so-called “endpoint user” backup software for laptops and PCs, for consumers and small businesses, to a broader focus on IT security for small-to-big organizations, including backup.
“We’re now talking more to the chief information security officers of clients [and prospects] than the chief information officer,” said CEO Joe Payne. “We need to transform the whole company from being experts in IT infrastructure to being experts in application security. It’s easy to articulate at a board meeting but harder to execute.”
Code42, with revenue of $115 million last year, had anticipated selling stock to the public by this year.
The company now has a goal of growing by 25 percent over the next couple of years and achieving $150 million-plus in revenue, a level at which it likely would give its venture-capital owners an optimal valuation in the stock market.
Code42, which has $30 million in the bank and said it doesn’t need more private capital, also has invested time and money to transition its hundreds of business clients to cloud-based storage, freeing them from having to invest in their own storage hardware.
“Code42’s evolution into a data security company has seen us advance our offering from IT infrastructure products to application security products,” Payne said in a statement released Wednesday, after employee meetings. “Now, we are making organizational changes to realign our resources around how we sell, deploy and support these new products in the market.”
Payne said the 55 people losing their jobs will receive severance and access to outplacement services.
Payne said if the revamped strategy works, employment should be back to 600 or more within a year.
He said Code42 needs more expertise in IT security. It needs fewer people who work on data backup.
Code42 faces fierce competition from entrenched competitors such as Digital Guardian, Forcepoint and GTB Technologies.
Payne conceded Code42 is in for a tough battle but said it has a distinctive product.
“The incumbent players try to block users from downloading on a thumb drive or sharing, and that can be a problem, particularly if you are just trying to do something like sharing with colleagues for a presentation,” he said. “We don’t block anything. We just track and keep a copy of everything. We know if something is stolen and who did it. It’s a competitive advantage.”
Code42’s 150,000 customers include Qualcomm, Schneider Electric, Juniper Networks, major financial institutions, the University of Minnesota and seven Ivy League universities.