5 Companies That Had A Rough Week

The Week Ending May 22

This week's roundup of companies that had a rough week include an admission by CSC's CEO about cloud computing, bad financial news from a leading storage equipment manufacturer, plans for a massive round of layoffs at a networking gear provider, the latest cyberattack victim in the health-care space, and PayPal's public spanking by a government consumer watchdog for alleged deceptive advertising practices.

Not everyone in the IT industry was having a rough go of it this week, of course. For a rundown of companies that made smart decisions, executed savvy strategic moves -- or just had good luck -- check out this week's "5 Companies That Came To Win" roundup.

CSC CEO: I Missed The Acceleration To Cloud Computing

CSC revealed this week that it's splitting into two companies. And among the explanations for why the struggling systems integrator was taking that route was an admission from CEO Mike Lawrie (pictured) that he missed key IT industry shifts -- most notably the rapid adoption of cloud computing.

"I missed some of the dynamics associated with the acceleration to cloud," Lawrie acknowledged during CSC's earnings call Tuesday. "It is accelerating and had a bigger impact than what I thought it was going to have in 2015."

Lawrie can be given credit for his honesty. But as leader of the $12.2 billion systems integrator, Lawrie's job includes setting the company's strategic direction to capitalize on industry trends. It's a tough week when you have to admit you underestimated the biggest shift in IT in the last decade.

Extreme Networks Cutting 18 Percent Of Its Workforce

Just how difficult things have become at Extreme Networks were illustrated this week when the company disclosed plans to restructure by cutting 18 percent of its global workforce -- 285 jobs. The restructuring initiative will cost the company $15 million in up-front charges, but is expected to reduce the company's operating costs by $40 million in fiscal 2016.

The news follows a 16 percent decline in the company's fiscal third-quarter sales reported earlier this month. That decline included a 21 percent plunge in product sales. As one channel partner assessed it this week: "It's kind of a mess over there right now."

The one silver lining for Extreme Networks' partners is that the company will rely even more on the channel for sales, given that the layoffs include a number of sales positions.

NetApp Takes Q4 Sales And Earnings Hit, Plans Layoffs

Extreme Networks wasn't the only IT vendor with bad financial news this week. Storage system builder NetApp announced its fourth-quarter sales and earnings results and they weren't pretty.

Net revenue for the quarter ended April 24 was down nearly 7 percent, year over year, while net income plunged more than 31 percent. And while NetApp didn't disclose specific numbers, the company's channel sales took a significant hit in the quarter.

NetApp executives said a slower-than-expected customer transition to the vendor's Clustered Data On-Tap systems was to blame for the sales slowdown. CEO Tom Georgens said the company would step up its investments in direct and channel sales to turn things around. But that's little compensation for the approximately 500 employees -- about 4 percent of the company's total workforce -- that will be laid off in the wake of the poor financial results.

Cyberattack Compromises Health-Care Data For 1.1 Million CareFirst Members

CareFirst BlueCross BlueShield reported Wednesday that a security review discovered that hackers had gained limited access to a database that is used by members to access the company's website and online services.

CareFirst said the hackers gained access to names, birth dates, email addresses and subscriber information for about 1.1 million members. But the company said password encryption prevented the attackers from gaining access to Social Security numbers, medical claims, and employment, credit card and financial data.

The security breach at CareFirst is the latest in a string of cyberattacks at health-care insurance companies disclosed this year including a cyberattack at Anthem that exposed information for some 80 million subscribers and employees, and an attack against Premera Blue Cross discovered in March that impacted 11 million customers.

PayPal Accused Of Deceptive Advertising, Pays $25 Million In Fines And Restitution

PayPal this week agreed to pay $25 million to settle charges brought by the Consumer Financial Protection Bureau that it illegally signed up customers for its PayPal Credit online credit service.

The CFPB alleged that PayPal signed up some customers for PayPal Credit (formerly called Bill Me Later) without asking their permission and then tricked them into using it as the default payment method for purchases made through PayPal Wallet, according to a Slate story. In some cases consumers selected other payment methods, only to have it switched back to PayPal Credit during the checkout process, the Slate story said.

The CFPB filed the complaint in the U.S. District Court for the District of Maryland on Tuesday. PayPal has agreed to pay $15 million in consumer refunds and a $10 million fine.