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McAfee Lays Off Hundreds, Senior Executives Depart
By Sarah Kuranda
Jan 24, 2019 11:03 AM PST
McAfee CEO Chris Young. Photo by Bloomberg
McAfee has laid off around 200 employees in the past two weeks, about 4% of its workforce, and eliminated hundreds more open positions, several people familiar with the matter said. At the same time, several senior sales executives, including Bill McAlister, senior vice president of sales for the Americas, have left.
The job cuts are the latest sign of turmoil at McAfee, a company that was once one of the best known brands in cybersecurity but in the past decade has lost market share to a wave of new competitors such as CrowdStrike and Cylance, and older rivals like Microsoft. Meanwhile, the company’s new controlling shareholder, TPG, has set goals for improvements in McAfee’s operating profit margins as it looks to grow the company.
THE TAKEAWAY
• McAfee lays off 200 employees
• Top sales executives depart
• Cuts reflect effort to meet profit goals set by TPG
McAfee’s revenue grew by a mid-single-digit percentage year over year in 2018, according to a person familiar with the numbers. The overall security market grew more than 12% during that same time, according to Gartner. McAfee’s sales growth wasn’t enough to meet the margin improvement goals set by TPG, a person familiar with the sales numbers said. Cutting costs is viewed by McAfee management as one way to hit those growth goals, two people familiar with the situation said.
The job cuts affect a wide range of departments across the company, including sales, engineering, finance and human resources. It’s the second round of cuts in recent months, following a smaller round last summer. McAfee also laid off some staff in 2017, shortly after its former parent Intel sold a controlling stake to TPG. At one point in 2017 McAfee had around 7,000 employees.
“It’s brutal over there,” one person with knowledge of the cuts said. McAfee declined to comment.
‘It’s brutal over there.’
Selling software to protect devices from viruses and other cybersecurity threats is “the most competitive segment of the security market,” said Andrew Nowinski, senior research analyst at Piper Jaffray. And, he said, while the security market is growing overall, many chief information officers are shifting their spending to other areas, like single-sign-on products that allow users to enter one password and gain access to many applications, which aren’t McAfee’s strengths. McAfee’s share of the security software market fell to 5.1% in 2017 from 8.7% in 2013, Gartner estimates.
McAfee’s top management has complained publicly that under Intel, which owned the firm between 2010 and 2017, stifled investment in new products and hurt its ability to compete against newer rivals. Once Intel sold control, CEO Chris Young promised to once again be the “No. 1 security vendor.”
To accomplish this, the company charged ahead with investment in a wider portfolio of security products to protect other areas like the cloud or applications instead of devices, its traditional area of strength. It acquired two companies—cloud security company Skyhigh Networks and cloud-based VPN provider TunnelBear—and eyed more. It launched a new brand with a bright red logo, and pledged a fresh start for the 32-year-old company.
McAfee Lays Off Hundreds, Senior Executives Depart
By Sarah Kuranda
Jan 24, 2019 11:03 AM PST
McAfee CEO Chris Young. Photo by Bloomberg
McAfee has laid off around 200 employees in the past two weeks, about 4% of its workforce, and eliminated hundreds more open positions, several people familiar with the matter said. At the same time, several senior sales executives, including Bill McAlister, senior vice president of sales for the Americas, have left.
The job cuts are the latest sign of turmoil at McAfee, a company that was once one of the best known brands in cybersecurity but in the past decade has lost market share to a wave of new competitors such as CrowdStrike and Cylance, and older rivals like Microsoft. Meanwhile, the company’s new controlling shareholder, TPG, has set goals for improvements in McAfee’s operating profit margins as it looks to grow the company.
THE TAKEAWAY
• McAfee lays off 200 employees
• Top sales executives depart
• Cuts reflect effort to meet profit goals set by TPG
McAfee’s revenue grew by a mid-single-digit percentage year over year in 2018, according to a person familiar with the numbers. The overall security market grew more than 12% during that same time, according to Gartner. McAfee’s sales growth wasn’t enough to meet the margin improvement goals set by TPG, a person familiar with the sales numbers said. Cutting costs is viewed by McAfee management as one way to hit those growth goals, two people familiar with the situation said.
The job cuts affect a wide range of departments across the company, including sales, engineering, finance and human resources. It’s the second round of cuts in recent months, following a smaller round last summer. McAfee also laid off some staff in 2017, shortly after its former parent Intel sold a controlling stake to TPG. At one point in 2017 McAfee had around 7,000 employees.
“It’s brutal over there,” one person with knowledge of the cuts said. McAfee declined to comment.
‘It’s brutal over there.’
Selling software to protect devices from viruses and other cybersecurity threats is “the most competitive segment of the security market,” said Andrew Nowinski, senior research analyst at Piper Jaffray. And, he said, while the security market is growing overall, many chief information officers are shifting their spending to other areas, like single-sign-on products that allow users to enter one password and gain access to many applications, which aren’t McAfee’s strengths. McAfee’s share of the security software market fell to 5.1% in 2017 from 8.7% in 2013, Gartner estimates.
McAfee’s top management has complained publicly that under Intel, which owned the firm between 2010 and 2017, stifled investment in new products and hurt its ability to compete against newer rivals. Once Intel sold control, CEO Chris Young promised to once again be the “No. 1 security vendor.”
To accomplish this, the company charged ahead with investment in a wider portfolio of security products to protect other areas like the cloud or applications instead of devices, its traditional area of strength. It acquired two companies—cloud security company Skyhigh Networks and cloud-based VPN provider TunnelBear—and eyed more. It launched a new brand with a bright red logo, and pledged a fresh start for the 32-year-old company.
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