ONI Slims Down

ONI Systems is laying off 16 percent of its staff and taking other measures to cut costs UPDATED 10/16 6:30pm

October 16, 2001

3 Min Read
ONI Slims Down

ONI Systems Inc. (Nasdaq: ONIS) said today that it is laying off 16 percent of its staff and is eliminating bonuses for its managers in order to conserve cash in a rapidly deteriorating economy.

The company's CEO, Hugh Martin, and COO, Rusty Cumpston, are also cutting their own salaries to $1 a year, each. The company is telling its remaining employees to forfeit a week's pay by taking a mandatory vacation during the fourth quarter of 2001.

The company informed its employees of the layoffs yesterday afternoon and it began to let staff go this morning.

The first news of ONI's layoff was published this afternoon when Light Reading ran a transcript of an audio recording of Hugh Martin that had been originally posted on the company's private intranet. ONI has confirmed that the recording was legitimate.

ONI won't say how many employees are affected by the layoff, but the number could be anywhere from 100 to 125 people, given the company's most recent published headcount of 776 employees as of June 2001.

Table 1: ONI Systems � Historical Headcount


# of Employees

December 31, 1999


December 31, 2000


June 30, 2001


"We are structuring the company for the future," said Martin on the audio recording. "We will be one of the survivors. And what's the foundation for survival these days? It's cash. Therefore, we've built a business plan that provides cash for four years with a minimal revenue forecast. To do this we need to structure the company to run efficiently on the revenue we can actually see. And so we are sizing all areas of the company that are revenue- or infrastructure-related, to have visible revenue forecasts."

Martin told Light Reading this afternoon that the revised business guidelines mentioned in the message to ONI's employees would help the company stay conservative in regards to its sales outlook by not relying on deferred sales to make its quarterly numbers. ONI will address more specifics about its restructuring during the company's earnings conference call on October 23, Martin says.

Late last month, ONI announced that it expects to see revenues in the range of $40 to $50 million for the third quarter ending September 30, 2001, down from its earlier guidance of $75 to $80 million.

The areas where ONI will increase spending include research and development and adding to the company's sales force that focuses on Regional Bell Operating Companies (RBOCs).

"For those of you who leave, I'm sorry. I hope that ONI treated you well and helped you grow. You will be missed," Martin said to ONI employees. "For those that stay we have an even greater responsibility to do everything we can to make our company the most successful it can be."

- Phil Harvey, Senior Editor, Light Reading

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