VMware To Lay Off up to 900 Despite Positive Earnings Report
Despite reporting rising revenues in its latest earnings report, cloud and virtualization giant VMware announced on Monday that it would be implementing companywide layoffs.
VMware's revenues grew by 22 percent from 2011 to 2012 to total $4.61 billion worldwide, according to a news release posted Monday evening on VMware's Web site. Operating income year-over-year increased by 18 percent, or $872 million, with net income at $746 million. The results met analysts' expectations.
Despite the growth, VMware confirmed in a conference call Monday afternoon that it plans to lay off up to 900 employees, or up to 7 percent of its workforce, by the end of the first quarter of 2013. VMware CEO Pat Gelsinger specifically mentioned jobs related to VMware's SlideRocket presentation software and other non-key cloud and virtualization technologies. The layoffs will result in a $70- to $80-million restructuring charge and could run up to $100 million as the company resizes its business units.
Despite the cuts, "the company is gaining a headcount of roughly 1,000 people this year," said David Davis, a VMware consultant and expert with TrainSignal and Virtualization Review contributing editor. "So, if you are an investor or a user, you should be happy that VMware is focusing on the products that are the most popular and make the most money by hiring people in those areas. ... If they start laying off vCloud marketing people, then I'll be concerned."
The job news is preceded by news of the fairly recent and sudden departure of VMware CTO Steve Herrod, who is heading up a new role at venture capital firm General Catalyst.
The news of job cuts, coupled with Gelsinger's cautious outlook for the next year, did have a short-term impact on parent company EMC's stock on Tuesday, with the stock losing nearly 5 percent in value. VMware itself was harder hit, shedding nearly a fifth of its stock value by the end of the trading day.
Michael Domingo is executive editor of MCPmag.com and host of Redmond Radio.