IT Firm The Nerdery Lays Off 24 Due to Slumping Profits

The Bloomington-based firm, which has roughly doubled its staff almost every year since its founding, now intends to grow at a “more manageable pace.”

Bloomington-based IT firm The Nerdery—which has recently been in the spotlight for growing its revenue and employee base at break-neck speed—on Friday laid off 24 employees, or 5 percent of its work force, as a result of slumping profits, CEO Mike Derheim announced in a blog post.
The layoffs came about three months after the firm launched its so-called “Nerd Drive”—with the goal of hiring 100 new employees in as many days; about 90 days into the effort, the firm has so far hired only 33 and expects to end up with 35 total new hires by the end of the 100-day period.
“We’ll fall short of a recruiting goal we called a moonshot from the outset,” Nerdery spokesman Mark Malmberg told Twin Cities Business in an e-mail Tuesday. (At the time it launched the recruiting campaign, the company did acknowledge that the prospect of hiring 100 people in as many days was an “audacious goal.”)
Derheim said in his Friday blog post that the company still plans to add employees this year, but it intends to do so “at a more manageable pace.” He said that 77 additional employees will be added over the next 11 months, about a third of the 222 employees added last year.
Most of the positions that were eliminated were ones not directly involved in client projects, including those in sales, human resources, and support functions. One of the positions cut was at The Nerdery’s Chicago office and the rest were at its Bloomington office.
The firm declined to disclose its 2012 profits or reveal the percent drop from 2011. Its 2012 revenue totaled $37 million, up 39.6 percent from 2011.
“We aren’t losing money, but running a thin margin means not saving up for a rainy day and a potential inability to handle bumps in the road,” Derheim said in his blog post. “But most importantly, it made us risk averse, and we can’t afford to miss opportunities we should be taking advantage of.”
The Nerdery’s revenue jumped 65 percent to $14.2 million in 2010 and then climbed 87 percent to $26.5 million in 2011. The firm, which in 2010 changed its name from Sierra Bravo Corporation, has appeared on Inc. magazine’s list of the nation’s 5,000 fastest-growing private companies five times, including last year. The company has touted the fact that it has “roughly doubled its staff and revenue almost every year since its founding.” It was also recently named to the “Flyover 50” list, which is produced by Kansas venture-capital firm Five Elms Capital and recognizes the 50 fastest-growing companies based in the middle of the country.
The Nerdery’s projects have included websites for Target, General Mills, Norton Antivirus, EA Sports, and LexisNexis.
The company also runs The Nerdery Overnight Website Challenge, an event held several times a year through which volunteer Web professionals have donated about $2.5 million in development services to 84 nonprofit organizations.
The Nerdery currently has about 437 employees, including 385 at its Bloomington office, 43 in Chicago, and 9 in Kansas City. The company is Minnesota's fifth-largest Web development and design firm based on revenue from Web projects.
To learn more about the firm, read Twin Cities Business’ October story here.