News

VMware Revenues Rising, But Job Cuts Looming

Virtualization and cloud behemoth VMware followed up good news of rising revenues in its latest earnings report with some bad news on impending layoffs.

• By Michael Domingo
• 01/29/2013

Virtualization and cloud behemoth VMware followed up good news of rising revenues in its latest earnings report with some bad news on impending layoffs.

First, the good news: According to a news release on the VMware site posted Monday evening, revenues grew 22 percent 2011 to 2012, with revenues totaling $4.61 billion worldwide. Operating income year over year increased 18 percent, or $872 million, with net income at $746 million. The results met most analysts' expectations.

Now, the bad news: The company 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 first quarter 2013. VMware CEO Pat Gelsinger specifically mentioned workers in non-key cloud and virtualization units such as those working on its SlideRocket presentation software. The layoffs will result in a $70-$80-million restructuring charge for 2013 and could run up to $100 million as the company resizes its business units.

Despite the cuts, "the company is gaining a head count 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 landed 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 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.