Blue Coat slashes staff, buys S7 services company

IDG News Service - Security-appliance vendor Blue Coat Systems is laying off close to 20% of its staff and restructuring its business in a drive to increase profitability.

The company announced the first of an expected 280 layoffs Wednesday and said it plans to close its facilities in Riga, Latvia; South Plainfield, N.J.; and Zoetermeer, Netherlands.

But Blue Coat is expanding in other ways. Today, the company said it would acquire S7 Software, a services company based in Bangalore. Blue Coat is paying $5.25 million in cash for the 65-person company.

S7 specializes in migrating applications from one platform to another. Blue Coat sells network security and performance monitoring appliances, but it is buying S7 because of the company's software development expertise.

Founded in 1996, Blue Coat employed about 1,500 before the layoffs and the S7 acquisition.

As part of its restructuring, Blue Coat will shift an undisclosed number of engineering jobs from its Sunnyvale, Calif., and Austin, Texas, offices to S7's offices in Bangalore and other locations. With new hires and S7 additions, the company's total headcount reduction will be closer to 10%.

The layoffs were, however, across the board, affecting sales and marketing as well, BlueCoat said.

Blue Coat is the latest of many Silicon Valley companies to lay off employees this year. On Wednesday, Sun Microsystems began sending out pink slips to about 3,000 of its employees as it continues to slash staff ahead of its impending acquisition by Oracle.

Also on Wednesday, Microsoft said it would lay off an additional 800 employees, after starting an initial round of 5,000 job cuts earlier this year. Cisco, IBM, Intel and others have also had layoffs in the past 12 months.