CyrusOne, a major data center operator, reduces its workforce by 12 percent.

CyrusOne, one of the largest data center providers, announced it is laying off 55 employees, representing about 12 percent of its workforce, to reduce expenses as demand from its largest hyperscale customers remains slow. "In recognition of the continued moderation in demand from hyperscale customers, a trend we first identified in late 2018, we believe it is appropriate to reduce our cost structure to more closely align the business with current market conditions," CEO Gary Wojtaszek said in a statement Monday. The company also announced that Tesh Durvasula, who has been running its European business, will step down from the role in March, to be replaced by Matt Pullen, the company's current managing director for Europe. CyrusOne expects to save about $10.7 million annually as a result of the layoffs and will incur a charge of about $5.9 million in the first quarter. The affected employees will receive severance and "customary transition assistance," the company said.

The layoffs reflect a dramatic shift in the data center market following years of unprecedented expansion. From around 2016 to 2018, hyperscalers—operators of the world's largest cloud platforms including Google, Microsoft, and Amazon Web Services—expanded their data center footprints so rapidly that developers like CyrusOne could not build facilities fast enough to meet demand. Hyperscale bookings accounted for as much as 60 percent of CyrusOne's leasing in a typical quarter during the boom years. However, the cloud giants' data center investment slowed significantly in 2019, with industry observers attributing the moderation to hyperscalers having leased substantial capacity in prior years and still "digesting" what they already had, as well as saturation in top markets such as Dallas and Northern Virginia.

CyrusOne had thrived during the expansion period, emerging as one of the leading players through its ability to build new hyperscale data centers quickly and employ creative construction funding strategies. The company had been expanding aggressively in Europe in recent years, acquiring the European provider Zenium, which operates data centers in London and Frankfurt, and building facilities in Dublin and Amsterdam. In June 2019, Wojtaszek expressed confidence about the company's prospects, noting that long-term demand drivers remained intact and that hyperscale demand in Europe was still strong, with almost all US-based hyperscalers leasing large in Frankfurt, London, Amsterdam, and Dublin.

Despite market volatility, CyrusOne's stock price had grown consistently over the preceding five years, climbing from just below $30 per share in early 2015 to approximately $70 the Friday before the announcement, though it dropped 8 percent on Monday following news of the layoffs and European leadership change. The company reported $250.9 million in revenue for the third quarter of 2019, up 21 percent year over year, with funds from operation per share of $0.91, up 15 percent. Speculation had emerged in prior years that CyrusOne management was in acquisition talks with potential buyers including institutional investors KKR, StonePeak Infrastructure Partners, and I Squared Capital, as well as rival Digital Realty Trust. However, Wojtaszek sought to end the speculation on an earnings call in October, stating the management was "not currently pursuing a sale of the company."