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Automatic Layoffs 2016: IoT Job Cuts Emerge

Thejo Kote

Thejo Kote

Automatic, an Internet of Things (IoT) company focused on connected cars, is laying off 28 percent of its workforce, which equates to about 24 employee job cuts, Venturebeat reported. It’s the latest sign that Silicon Valley could be undergoing a mini tech correction of sorts.

Founded in 2011, Automatic has raised more than $32 million in venture funding. But unlike many startups, the company believes it has a clear near-term path to profitability. Indeed, Automatic expects to achieve profitability by early 2017, CEO Thejo Kote told VentureBeat. Revenues at the company grew 400 percent from 2014 to 2015, he told the media site, though Kote didn’t mention specific dollar figures.

Automatic’s layoffs are the latest indication that Silicon Valley is going through a reset of sorts, with some startups and legacy IT companies cutting selected headcount. Indeed, tech company layoffs around Silicon Valley more than doubled during the first four months of 2016 vs. the corresponding period in 2015.

On the one hand, many of the cuts involve client-server companies like Intel and Symantec, which were late to the cloud, mobile and/or subscription software shifts. But on the other hand, the cuts also startups in “hot” emerging markets like the Internet of Things (IoT).

Automatic develops a connected car adapter and apps for iPhone, Android, and web. Te adapters link to Automatic’s cloud platform. Related applications diagnose engine trouble, detect accidents and send emergency response, and help customers save money on driving, the company has claimed.

Going forward, Automatic will focus more heavily on two vertical markets: Auto insurance and fleet management, VentureBeat reported.

IoT Partner Programs: Tread Carefully

Automatic doesn’t have a traditional channel partner program, but the company does have a partner ecosystem featuring insurance companies and other businesses that have distributed its devices.

Still, the changes at Automatic represent a healthy reminder for channel partners to tread carefully in the IoT market. On the one hand, the overall industrial IoT market is expected to grow 8.03 percent annually from 2015 to 2020, reaching $151 billion, according to Markets and Markets. But on the other hand, many of the top IoT startups are high-risk businesses with no immediately path to profitability.

The situation is equally risky in the consumer market, where big bets like Google NEST and Apple HomeKit have yet to pay any clear dividends. NEST, in particular, has faced product delays and skepticism from a range of sources in recent months.

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