Carbon Black parent VMware is freezing employee salaries, cutting executive pay and suspending 401K retirement plan matching. The moves, first reported by Business Insider, reinforce some hard realities: Not even hot technology sectors like cloud, virtualization and endpoint security are immune to coronavirus pandemic and associated economic fallout.
VMware acquired Carbon Black for $2.1 billion in October 2019. The move positioned VMware to compete head-on against endpoint protection and cybersecurity software firms like BlackBerry Cylance, CrowdStrike, Cybereason, SentinelOne, Sophos and OpenText's Webroot. All of those endpoint security firms work closely with MSP and MSSP channel partners.
Ahead of the pandemic, Carbon Black was performing well under VMware's ownership. Among the highlights:
- VMware by late 2019 essentially doubled Carbon Black's installed base to more than 10,000 customers, CEO Pat Gelsinger said during VMware's February 2020 earnings call.
- VMware's parent, Dell Technologies, adopted Carbon Black as its preferred endpoint security standard for customers.
- Sister company SecureWorks, a Top 200 MSSP, has also embraced Carbon Black.
- Additional MSSPs -- including Delta Risk -- have embraced the endpoint security system.
Technology Cost Cutting Impacts Security Sector
Still, VMware is cutting costs amid the current economic uncertainty. The financial moves, according to Business Insider, include:
- A twice-per-year VMware bonus plan is now once-per-year.
- Annual promotion reviews are postponed.
- CEO Pat Gelsinger and top executives will take pay cuts in Q2 and Q3 of this fiscal year.
Cost cutting efforts are spreading across the cybersecurity and technology industry. Recent developments include:
- OpenText, parent of Carbonite and Webroot, is cutting 5 percent of its staff and reducing compensation in many areas through June 2021, CEO Mark Barrenechea disclosed on the company’s May 1 earnings call.
- FireEye is laying off about 6 percent of its staff, CEO Kevin Mandia disclosed on the company’s April 28 earnings call.
- Herjavec Group, a Top 200 MSSP every year since this Website’s launch, cut 8 percent of its 350-person workforce, founder and Shark Tank investor Robert Herjavec told CNBC on April 2.
Bracing for Impact
Even well-known, cloud-based cybersecurity software companies are bracing for impact. An example: BlackBerry, parent of Cylance, has modeled scenarios where revenue drops 20 percent, 30 percent and even 50 percent, CEO John Chen told Wall Street analysts during an earnings in late March 2020.
While Chen doesn’t expect those worst-case revenue scenarios to occur, BlackBerry modeled them to prove the company could survive worst-case industry scenarios, he told analysts at the time.
Meanwhile, technology startups have been particularly hard-hit by layoffs. Over 35,000 startup employees have been laid off amid the COVID-19 pandemic, Layoffs.fyi reports as of May 5, 2020.
