CXtec maps new strategy after layoffs

CNY Business Journal (1996+), Jul 11, 2008 by Tampone, Kevin

SALINA - CXtec, which announced July 2 it would cut 45 jobs after losing a major portion of its business, should emerge from its recent rough patch with more potential for growth, the company's top executive says.

The layoffs came after the company lost a partner agreement with Cisco systems last fall.

The agreement allowed CXtec to sell refurbished Cisco products under its own "equal2new" designation. The deal with Cisco began in 2001 and sales of those products eventually grew to about a quarter of CXtec's business.

The firm is now reorganizing its remaining business into two separate divisions, says William Pomeroy, CXtec's founder and CEO.

"We spent the last eight months trying to deal with the problem of losing that particular line of business," he says. "What this presents is a fresh look and a fresh solution to that problem.

"I think that the change is going to be quite significant."

CXtec's remaining business includes sales of new and refurbished networking, voice, and data-center equipment, as well as new Cisco products and services. Under the company's new structure, one division will handle Cisco sales and the other will concentrate on voice, data-center, and networking gear.

"Cisco requested, and CXtec agreed, to a standard indirect channel partner agreement moving forward," Gareth Pettigrew, a Cisco spokesman said in an e-mail. "Cisco is working closely with CXtec to ensure a seamless transition and continue the successful partnership between our two companies for 2008 and beyond."

The new relationship between the companies is in line with the agreements Cisco has with other partners.

CXtec's new structure will ultimately be good for the company, Pomeroy says.

Previously, all of CXtec's salespeople sold all of the company's different products and services. Separating the business into distinct divisions will allow each one to concentrate on specific areas.

The specialization will cut down on distractions and allow employees suited to one area or another to focus on their strengths, Pomeroy explains.

"Before, all the businesses were intertwined with each other," he says. "That's the way we evolved."

Pomeroy adds CXtec may have decided to reorganize its business in this way regardless of its relationship with Cisco.

The layoffs were the first in CXtec's 30-year history. Following the cuts, the firm employs about 335.

The company cut 42 jobs at its Salina headquarters and three from its Buffalo office, which closed. Pomeroy notes CXtec still has eight employees based in the Buffalo area, who now telecommute.

Apparently, CXtec's equal2new agreement with Cisco was one of a kind.

"That was the problem," Pomeroy says. "Evidently, they didn't have an arrangement like that with other companies. They wanted to level the playing field. As much as we didn't like it, we can understand it from their viewpoint. It makes their business administration easier to have everyone on the same playing field."

Since the equal2new sales disappeared, CXtec lost 638 customers and revenue declined about 30 percent. The firm generated about $140 million in total sales last year.

"We took a proactive view in looking at this," Pomeroy says. "We were far from disaster, but we didn't want to get to the disaster and have a worse situation develop."

Pomeroy had no sales projection for 2008. The company doesn't expect any further layoffs.