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QTS Realty Trust Data Center Reorganization Alarms Investors

Chad Williams

QTS Realty Trust Inc.‘s stock (NYSE: QTS) fell roughly 20 percent this morning after the data center provider announced a reorganization, executive changes, apparent plans for headcount cuts, and expected exits from certain cloud and managed services markets.

Ironically, QTS delivered Q4 revenue results yesterday that exceeded Wall Street’s expectations. Revenues for Q4 were roughly $118.9 million — up 12.8 percent year-over-year and nearly $700,000 ahead of Wall Street’s expectations, according to SeekingAlpha.

However, a company restructuring plan — which includes shedding some “non-core” managed and cloud services business — spooked investors.

QTS Realty Trust Reorganization Details

According to CEO Chad Williams, the QTS restructuring will:

  • Realign the business around hyperscale and hybrid colocation opportunities: QTS’ current hyperscale opportunity pipeline is four times larger than its pipeline at the beginning of 2017, the company indicated. In terms of hybrid colocation services, the company will lean heavily on software-defined data center (SDDC) and software-defined networking (SDN) opportunities.
  • Exit certain cloud and managed services markets: QTS will “seek to exit certain C3 custom products the company has identified as “Non-Core,” which includes dedicated cloud, specific managed services, and colocation revenue attached to specific dedicated cloud customers. The company will reduce its cloud and managed services products from more than 100 offerings to approximately 15. QTS expects to complete the exit of Non-Core products by the end of 2018, the company said.
  • Implement broader cost reduction initiatives across data center leases and rents; software licenses; communications; hardware depreciation and personnel. ChannelE2E Translation: It sounds like layoffs of some sort or headcount cuts are coming.

QTS Realty Trust Executive Departures, Changes

Among the executive changes:

  • Dan Bennewitz, COO – Sales and Marketing, plans to retire in 2018. QTS has commenced a search for a Chief Revenue Officer as a replacement who will lead both Hybrid Colocation Sales and Marketing. Tag Greason, EVP of Sales will continue to lead QTS’ Hyperscale sales team.
  • Jim Reinhart, QTS’ COO-Operations will be transitioning out of the organization. His operational responsibilities will be assumed by David Robey and CTO Jon Greaves.

QTS and many of its rivals have been buying up data centers worldwide in a push to maintain critical mass as enterprises and MSPs abandon or trim traditional on-premises data centers.

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