& cplSiteName &

VMware Announces 800 Layoffs, Executive Shake-Up

Mitch Wagner
1/27/2016
50%
50%

VMware is cutting 800 staff as part of a restructuring process that will see the company shift its attention away from its declining on-premises computing business towards its growing cloud and networking business.

It also announced a shake-up in its executive ranks, with Jonathan Chadwick stepping down as CFO, COO and executive vice president: He will be replaced by Zane Rowe as CFO, effective March 1. Rowe was previously CFO of VMware Inc. (NYSE: VMW)'s majority owner, EMC.

Growth in on-premises computing is slowing as the industry shifts to hybrid and public clouds, noted VMware CEO Pat Gelsinger during the company's fourth-quarter earnings call on Tuesday. That's reflected in VMware's own product portfolio, as its mainstay vSphere business is slowing down but software-defined data center products, including compute, storage, networking and management, are growing.

Networking saw a "stellar" year, with 100% NSX growth year-over-year for a total bookings run rate well over $600 million and VSAN total annual run rate well over $100 million, Gelsinger said.

And VMware is doubling down on cloud services. Later this year, the company expects to introduce products to create secure networks across public clouds, including Amazon.com Inc. (Nasdaq: AMZN) Web Services and Microsoft Corp. (Nasdaq: MSFT) Azure, whether the underlying infrastructure runs on VMware or not. This technology is currently being tested, Gelsinger said.

Chadwick is leaving to expand his advisory role working with companies as a non-executive board member. Rowe, the new CFO, has a resume that includes Apple Inc. (Nasdaq: AAPL), United and most recently CFO of EMC.

VMware plans to use the savings from layoffs to reinvest in field staff, technical staff and support for its growth products. The company will accrue a $55 million to $65 million GAAP charge in the first half to account for the layoffs.

Revenue for the fourth quarter rose 10% year-over-year, to $1.87 billion. Non-GAAP operating earnings were $534 million, or $1.26 a share, up 17% from the year-ago quarter. Analysts forecast earnings of $1.25 on sales of $1.85 billion.

VMware said it expects to post revenue of $6.8 billion to $6.9 billion next year, well below analyst expectations of $7.2 billion. It expects 2016 profit of a maximum $4.16 per share, below the $4.20 consensus.

VMware traded at $49.30, up 1.11%, in after-hours trading on Tuesday.

Dell Technologies (Nasdaq: DELL) announced in October that it will buy EMC Corp. (NYSE: EMC), which owns a controlling interest in VMware, for $67 billion. The market has not been kind to VMware in the transaction; VMware opened at $73.90 the morning the transaction was announced, October 12. (See Dell Buys EMC for $67B in Biggest Tech Deal Ever and Dell-EMC-VMware Merger Could Push Comms to Kids' Table.)


Want to know more about the cloud? Visit Light Reading's cloud services content channel.


A few days later, VMware announced the Virtustream cloud partnership with EMC, then backed out of that deal in December, leaving EMC to manage Virtustream alone. (See VMware, EMC Launch Cloud Partnership Amid Dell Acquisition – Confused Yet? and VMware Exits Virtustream Cloud Partnership .)

EMC announced an unspecified number of job cuts early this month, for charges of about $250 million. (See EMC Cuts Jobs Ahead of Dell Takeover.)

The shift to cloud that VMware is experiencing is part of the overall industry shift to New IP, as users demand greater agility, cost reduction and flexibility from networks.

Related posts:

— Mitch Wagner, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profileFollow me on Facebook, West Coast Bureau Chief, Light Reading. Got a tip about SDN or NFV? Send it to wagner@lightreading.com.

(1)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
MikeP688
50%
50%
MikeP688,
User Rank: Light Sabre
1/27/2016 | 4:32:17 AM
Brief Thoughts
This is not truly "unexpected"--Right here in this community this was reported.    It will be interesting to see if and when the merger is finalized how will the company deal with the "New IP".  What is clear is that others are not standing idly by.  
Featured Video
From The Founder
Light Reading founder Steve Saunders grills Cisco's Roland Acra on how he's bringing automation to life inside the data center.
Flash Poll
Upcoming Live Events
March 20-22, 2018, Denver Marriott Tech Center
March 22, 2018, Denver, Colorado | Denver Marriott Tech Center
March 28, 2018, Kansas City Convention Center
April 4, 2018, The Westin Dallas Downtown, Dallas
April 9, 2018, Las Vegas Convention Center
May 14-16, 2018, Austin Convention Center
September 25-27, 2018, Denver, Colorado
October 23, 2018, Georgia World Congress Centre, Atlanta, GA
November 8, 2018, The Montcalm by Marble Arch, London
November 15, 2018, The Westin Times Square, New York
December 4-6, 2018, Lisbon, Portugal
All Upcoming Live Events
Hot Topics
Trump Says Foxconn Will Make iPhones in US
Dan Jones, Mobile Editor, 1/15/2018
Net Neutrality Moves Are as Futile as Trump's Comb-Over
Iain Morris, News Editor, 1/18/2018
Huawei, ZTE Face US Federal Ban
Iain Morris, News Editor, 1/15/2018
Analyst: Verizon's Fixed 5G Is a Loss Leader for Mobile
Dan Jones, Mobile Editor, 1/16/2018
Ericsson Lurches to $1.8B Write-Down
Iain Morris, News Editor, 1/16/2018
Animals with Phones
Live Digital Audio

A CSP's digital transformation involves so much more than technology. Crucial – and often most challenging – is the cultural transformation that goes along with it. As Sigma's Chief Technology Officer, Catherine Michel has extensive experience with technology as she leads the company's entire product portfolio and strategy. But she's also no stranger to merging technology and culture, having taken a company — Tribold — from inception to acquisition (by Sigma in 2013), and she continues to advise service providers on how to drive their own transformations. This impressive female leader and vocal advocate for other women in the industry will join Women in Comms for a live radio show to discuss all things digital transformation, including the cultural transformation that goes along with it.

Like Us on Facebook
Twitter Feed