VMware prepares for weak, transitionary 2016 as 800 jobs axed

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VMware announces 2016 revenues below analyst expectations after strong last quarter of 2015

VMware will be laying off 800 workers this week as the virtualisation specialist, about to be sucked into the Dell-EMC merged entity, predicted a weak 2016. Rumours of job cuts surfaced at the end of last week and were reported on ChannelBiz.

The company also appointed new chief financial officer Zane Rowe this week, who held the same position at EMC. Departing CFO Jonathan Chadwick has left to pursue “advisory roles”.

VMware has forecast 2016 revenues and profit below analyst expectations, who were predicting revenue of $7.21 billion for this year. Instead, VMware has said it expects sales between $6.8 billion and $6.95 billion (£4.75 – £4.85bn) this year.

cash-600x387-600x387The news follows a 40 percent fall in VMware’s share price since the announcement of EMC’s sale to Dell back in October.

VMware will also take a $65 million (£45m) charge for axing 800 jobs, with the company planning to reinvest the savings in field, technical and support resources associated with growth products.

The job cuts and weak forecast put a dampener on what were otherwise strong looking 2015 financial results. VMware’s net income rose 14.4 percent in the quarter ending December 31, up to $373 million (£261m). Revenue as a whole rose 9.7 percent to $1.87 billion (£1.31bn).

VMware’s Q4 2015 was a solid finish to 2015,” said Pat Gelsinger, VMware CEO. “We were especially pleased with the growth across our portfolio of emerging products and businesses, including NSX, End-User Computing and Virtual SAN. All of these businesses demonstrated strong growth in both Q4 and for the full year, underscoring the momentum we expect to continue into 2016.”

But CEO Gelsinger’s “multi-cloud, multi-device” strategy leaves behind products such as vSphere and vCloud Air, as sales for these products fall because of a lack of need for core compute virtualisation.