VMware Announces Mass Layoffs After Positive Earnings Report
Cloud and virtualization vender VMware announced on Monday that the company would be instigating company-wide layoffs. The news comes after VMware reported rising revenues in its latest earnings report.
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 worldwide. Operating income year over year increased 18 percent, or $872 million, with net income at $746 million. The results met analysts' expectations.
Now, the bad: VMware confirmed in a conference call Monday afternoon that it's set 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 jobs related to its SlideRocket presentation software and other non-key cloud and virtualization technologies. The layoff will result in a $70-$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.
Michael Domingo is executive editor of MCPmag.com and hosts the Redmond Radio podcasts.