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QTS Shakes Up Executive Team, Realigns Business Around Hyperscale And Hybrid Colocation Offerings

The Overland Park, Kan.-based company, No. 64 on the CRN Solution Provider 500, said the strategic shift will significantly narrow the scope of its cloud and managed services business.

Solution provider QTS Realty Trust is overhauling its go-to-market strategy in an attempt to simplify its product portfolio and double down on its core data center business.

The Overland Park, Kan.-based company, No. 64 on the CRN Solution Provider 500, detailed the restructuring Tuesday on the eve of its fourth-quarter and full-year earnings briefing with investors. The shift will narrow the scope of QTS' cloud and managed services solutions – now considered a "non-core" business – to reduce complexity while improving predictability and efficiency, the company said.

QTS also announced a pair of senior executive moves: COO of Sales and Marketing Dan Bennewitz will retire in 2018, and COO of Operations Jim Reinhart will be "transitioning out of the organization." David Robey will take the title of COO, and CTO John Greaves will assume more leadership responsibility in the hybrid colocation business.

[Related: QTS Aims To Make Cloud Migration Easier With New, Deeper AWS Partnership]

In addition, the company has begun its search for a chief revenue officer, who will be responsible for hybrid colocation sales and marketing.

"By simplifying our business and cost structure we anticipate achieving a meaningful increase in our profitability and long-term value for shareholders," QTS Chairman and CEO Chad Williams said in a statement.

QTS, which operates 18 different data center locations in North America, has restructured its sales organization so that its C1-Wholesale team is now responsible for the solution provider's top 30 Hyperscale customer accounts. QTS said the opportunity pipeline around Hyperscale "is four times larger than its pipeline at the beginning of 2017."

The strategic pivot will also see the QTS managed cloud portfolio shrink from 100 products to just 15, which the company said will "significantly" reduce business complexity.

"By exiting Non-Core products, the Company expects to realize meaningful operating cost savings and enhanced predictability in the business. QTS expects to complete the exit of Non-Core products by the end of 2018," QTS wrote.

Finally, QTS outlined a cost reduction program aimed at reducing expenses associated with leased data center property rent, software licenses, communications, hardware and personnel.

QTS reported revenues of $118.9 million for the fourth quarter ended Dec. 31, an increase of 12.8 percent year-over-year. That beat Seeking Alpha's projection by $680,000. The company also saw full-year sales of $446.5 million for fiscal 2017, up 11 percent from the previous year's mark of $402.4 million.

QTS also reported a net loss of $16.1 million for the most recent quarter and full-year net income of $1.5 million, both down from net income of $5.5 million and $24.7 million in the respective year-ago periods.

According to the company's financial results, cloud and managed services sales represented less than 15 percent of total QTS revenue in fiscal 2017.

"Our restructuring plan allows QTS to re-focus 100% of our resources on the two strongest growth drivers in our business and accelerate value creation for shareholders. In addition, this realignment creates an opportunity for several of our leaders to step into more substantial roles and help lead QTS into our next phase of growth supported by Hyperscale and Hybrid Colocation," Williams stated.

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