The Cloud

VMware Cuts 800 Jobs As Merger Doubts Linger

The data center software provider is following the lead of parent company EMC, which is house cleaning ahead of its acquisition by Dell.
Matthew HellerJanuary 28, 2016

With Dell’s $67 billion acquisition of EMC still short of the finish line, VMware — the EMC-controlled seller of data-center software — is laying off 800 employees.

The layoffs were announced Tuesday as VMware released its fourth-quarter earnings. The company expects the cuts to cost between $55 million and $65 million.

While VMware operates as a separate, independent company from EMC, its stock has dropped more than 40% since the Dell takeover was announced late last year. EMC has itself launched layoffs that will cost about $250 million.

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“These changes emanate from the difficulty Dell and EMC have had getting investors, especially VMware investors, to swallow this deal,” Fortune said.

According to the Wall Street Journal, the deal has been “the painful first blow of a one-two punch. The second has come from cloud-computing leaders and Microsoft, which have been wooing VMware’s corporate customers by selling computing power via the Internet.”

“Such services obviate the need for the corporate data centers that run VMware’s software,” the WSJ said.

For the fourth-quarter, VMware’s net income increased to $373 million, or $0.88 per diluted share, compared with $326 million, or $0.75 per diluted share, for the year-ago period.

“VMware’s Q4 2015 was a solid finish to 2015,” CEO Pat Gelsinger said in a news release. “We were especially pleased with the growth across our portfolio of emerging products and businesses.”

But VMware also reduced its guidance for the coming year, saying 2016 revenues will be between $6.785 and $6.935 billion, a rise of 2% to 4% from 2015’s numbers. Analysts had been expecting revenues to total $7.2 billion, up 9%, for the next year, according to data compiled by Thomson Reuters.

EMC shareholders are expected to vote on the Dell takeover by early May.