RigNet Inc., which offers a range of managed services in the oil and gas vertical, has confirmed layoff plans that will cut about 12 percent of the company's staff by December 31. The plan, hatched by new CEO Steven Pickett, also creates a "single global managed services sales organization to drive both market share and revenue growth."
Pickett joined RigNet about six weeks ago, succeeding interim CEO Marty L. Jimmerson. RigNet is a deeply respected MSP in the oil and gas vertical. The company offers fully-managed voice and data networks to more than 1,000 remote sites in over 50 countries on six continents. Many of those locations are energy facilities and maritime vessels.
RigNet's oil and gas vertical market expertise is both a blessing and a burden. Pricing turmoil has undermined RigNet and other MSPs in that sector over the past year. As a result, Pickett needs to cut costs while leading the company into new verticals.
Amid the current reorganization, RigNet expects to achieve annualized savings of approximately $3.5 million after taking a restructuring charge of approximately $4.5 million in the third quarter of 2016 for employee severance expenses, facilities costs and related matters.
Multiple Signs of Trouble
RigNet has been shaking up its business over the past year. Key executive changes surfaced in January 2016, as the company attempted to push beyond the oil and gas industry vertical. Around the same time, the company completed the Tecnor acquisition.
But by February 2016, RigNet revealed weak quarterly results, challenges from a specific customer contract dispute, and an urgent need to diversify beyond the oil and gas market. At the time, interim CEO Marty L. Jimmerson stated:
"Our managed services business performed well against a difficult market that was challenged as a result of declining oil prices and reduced customer spending. While we are operating in a market that we anticipate will remain difficult in the interim, we will continue to focus on providing the same best-in-class and high quality services to the energy industry during this down cycle. Importantly, we have taken steps to expand our service offerings beyond an energy pure play by focusing our managed services core competencies on additional remote communication market opportunities. We are disappointed in the amount of time and resources it has taken to resolve the outstanding project contractual dispute with our TSI customer. While we recorded a significant adjustment in the quarter, we are pursuing multiple avenues of dispute resolution that are available to us to reach a satisfactory conclusion to the matter."
RigNet settled the TSI customer dispute a few weeks later but the company still wasn't adapting quickly enough. By May 2016, the company shook up its TSI business (now called RigNet Systems Integration and Automation) and a group VP left RigNet at the time.
RigNet: New CEO Arrives, Restructuring Plan Emerges
By May 31, 2016, RigNet announced Steven E. Pickett as its new CEO. Pickett's background includes a blend of technical, network and global experience. After six weeks on the job, Pickett has now unveiled the company reorganization and staff cuts.
In a prepared statement he said:
"By implementing this new organizational structure, the company will reduce spending and both flatten and streamline the organization to provide best-in-class customer experiences across the world. We will be better positioned to generate revenues from over-the-top applications that can help our customers drive efficiency in their businesses. And, through more focused efforts, we will be better positioned to grow revenue in new vertical markets."
Which vertical markets? ChannelE2E is checking on that now.