Teradici's PC-Over-IP Technology Faces Uncertain Future After Deep Layoffs

Teradici, a 10-year old vendor of technology for virtual desktops, laid off around 20 percent of its staff last week as part of a corporate restructuring, sources familiar with the matter told CRN Friday.

The Vancouver-based vendor, which licenses its flagship PC-over-IP technology to Hewlett-Packard, Dell, Samsung, VMware, Amazon Web Services and other vendors, has been seeking additional funding to continue its operations but hasn't managed to secure any, the sources said.

Now, Teradici is looking to cut costs by laying off nearly its entire North American sales force, through which the vendor has traditionally driven the vast majority of its revenue, said the sources.

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Teradici had around 225 employees prior to the recent job cuts, according to the sources. Teradici has raised nearly $73 million in venture capital to date, but its last funding -- an $8.8 million Series A round-- came in 2011, according to Crunchbase.

A Teradici spokesperson confirmed the layoffs to CRN Friday via email and said "fewer than 50" positions were eliminated in the restructuring but did not delineate the job functions that were impacted.

Teradici's restructuring wasn't just aimed at cutting costs, but was also about "reconfiguring our workforce to better serve our customers and partners and to put proportionally more resources into product development and R&D," said the spokesperson.

PCoIP boosts multimedia performance for virtual desktops and devices and lets 3-D graphics and high-definition video run smoothly over a remote connection. Teradici also touts PCoIP as a security enhancer because customer data remains on premise and is encrypted when sent to desktops and devices.

Teradici licenses PCoIP to several PC vendors, which include it with the hardware customers use to access virtual desktops. Amazon Web Services, through a 2013 licensing agreement with Teradici, uses PCoIP in its Workspaces desktop-as-a-service offering.

Teradici started out as a hardware vendor and is trying to transition into software, but has encountered numerous technical difficulties along the way, said the sources.

In early 2013, Teradici launched a software product called Arch that lets customers use PCoIP with Microsoft server-based desktops, but the vendor repackaged the product later that year and now uses it in Amazon WorkSpaces and VMware Horizon Air desktop-as-a-service offerings.

"Our business model has changed significantly over the past two years," the Teradici spokesperson said in explaining the move. "Rather than selling direct to enterprise, we are enabling larger partners to deliver hosted workspaces to their end-users. This shift in strategy is the primary driver for our restructure."

One of Teradici's oldest partners is VMware, which uses PCoIP -- in software form -- in its View desktop virtualization product through an agreement struck in 2008. PCoIP plays such a key role in VMware View that one partner described it to CRN as being akin to "a V8 engine inside a Ford 150."

Some of CRN's sources believe Teradici may have to look for a buyer soon. The vendor, which is privately held, has been stuck around the $50 million annual revenue mark for the past couple of years and is having trouble growing its business, the sources said.

The spokesperson denied that Teradici is looking for a buyer. "We remain focused on developing and enhancing PCoIP technology to deliver the best remote computing experiences, and growing the PCoIP ecosystem," he said via email. The spokesperson said the company has "seen significant growth in the past few years, and investors are happy with the financial performance of the company. However, there is room for improvement, and this reconfiguration will help us increase profitability while improving our products and services," said the spokesperson.

Sources told CRN that VMware would be the most likely candidate to acquire Teradici if it does end up selling, and that VMware holds first right of refusal for an acquisition offer. Both VMware and Teradici declined comment.

Given the key role PCoIP plays in VMware's end-user computing business, and the implications if a competing vendor were to swoop in and acquire it, sources told CRN they'd be surprised if VMware passed up an opportunity to purchase Teradici if it does look to sell.

However, other sources told CRN that VMware has been actively trying to reduce its reliance on PCoIP in recent years. VMware has developed its own similar technology, called Blast. Sources say VMware's focus on Blast is part of its effort to distance itself from Teradici, the sources said.

"VMware would like nothing more than to not have to deal with Teradici anymore," said one source familiar with the matter.