Sitecore has cut its workforce by about 70 people, or roughly 5% of its global workforce, CMSWire has learned. The layoffs come following reports of a disappointing performance in the recently completed fourth quarter of fiscal year 2019. 

After at least two straight years of reported gains, multiple sources close to the layoffs — including one Sitecore employee — cited the failure to meet fourth-quarter financial targets as the catalyst for the layoffs. The Copenhagen-based digital experience provider reported more than 35% growth in annual recurring revenue in fiscal year 2018 and also reported year over year gains in the recently ended fiscal year 2019. Back in 2015, it reported five straight years of growth.

Sitecore: 'We Realigned Resources'

A Sitecore spokesperson, reached by CMSWire Wednesday afternoon, did not confirm the number of employees let go nor whether the layoffs took place. When asked directly about the layoffs, the spokesperson stated, "Recently,we realigned resources in a few areas of our business to better map the right mix of investments to our strategic growth areas. We are business as usual, coming off of a year of double-digit growth and investment in FY19 and we are excited about FY20." The spokesperson added Sitecore, "provides mission critical solutions in a fast-growing market, and we are committed to bringing best-in-class technology and services to our customers and partners." 

Sitecore's staff cuts were due to expenses exceeding project revenue budgets, according to the employee who spoke with CMSWire on the condition of anonymity. Sitecore didn't meet its recent projections to its board of directors, and expenses were outpacing income. The company has faced challenges from Adobe in competition for the large enterprise market and Episerver in the small- to medium-size business arena. 

Year of Acquisitions

Sitecore did expand its employee base and capabilities in the past year with two acquisitions that added about 130 employees. Sitecore acquired content marketing software provider Stylelabs last October and followed it with the acquisition of digital consultancy Hedgehog in May. 

In fiscal year 2018, Sitecore reported adding 300 net-new customers and a record performance in North America in the fourth quarter, as well as "significant progress on the business model transition with a full-year increase in subscription and cloud revenue of more than 115 percent compared to fiscal year 2017." 

Learning Opportunities

CMSWire first heard rumors of the layoffs in a LinkedIn post by Tom Wentworth, SVP of product marketing at Sitecore competitor Acquia.

Is Sitecore Prepping for an Acquisition?

Is Sitecore readying for an acquisition? Maybe, according to one analyst. "Companies often slim down before recapitalization, merger or sale," R Ray Wang, principal analyst and co-founder of Constellation Research, said when asked Wednesday about the Sitecore layoffs. "I’m not sure what’s next but I’m sure we will find out soon." 

Sitecore had layoffs in 2015. At the time, multiple sources told CMSWire the reductions affected between 100 and 150 employees, mostly in Europe. Company officials at the time called it a “modest workforce reduction." 

Those layoffs preceded perhaps the biggest news for the 18-year-old company came in April 2016: Swedish private equity investor EQT acquired the company for $1.14 billion. It also preceded similar moves in the martech space by other private equity firms, namely Vista Equity Partners and its acquisition of Marketo in May 2016 for $1.79 billion and Insight Venture Partners' buy of Episerver in September 2018 for $1.16 billion. 

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