VMware to cut 900 jobs, focus on strengths

The cloud infrastructure company will exit of certain lines of business and consolidate facilities.
Written by Andrew Nusca, Contributor

On the heels of its quarterly earnings, virtualization specialist VMware revealed this afternoon that it will eliminate 900 jobs in an effort to streamline operations.

The figure, revealed in a Form 8-K filing with the U.S. Securities and Exchange Commission, is expected to result in a charge of approximately $70 million to $80 million, the company said. It also plans to exit of certain lines of business and consolidate facilities; that's expected to result in a charge of about $20 million to $30 million. In total, $90 million to $110 million in costs.

The plan should be completed by the end of 2013.

Chief executive Pat Gelsinger offered further detail during the earnings call this evening.

"As we enter Q1 [of 2013], we are actively focusing our investments and resource to capitalize on these opportunities. And by definition, there areas we plan to deemphasize across the business to do this," Gelsinger said. "One thing I've learned over the years is the importance of prioritization and execution. So, I have been working with my leadership team to ensure we have the right level of resources in the proper places for 2013 and beyond."

There are two parts to that plan: a "portfolio rationalization" in favor of the company's strengths, and "a realignment of resources" as it scales back in some areas of business and increases prioritized investments. That includes a shift of talent to new roles "that support our core growth opportunities." It also includes "some targeted headcount reductions," he said.

The cuts come after the addition of more than 6,700 people to the company over the last three years. The company still expects to hire through 2013 and estimates that it will increase its headcount by 1,000 people by the end of fiscal 2013. 

"You will also see us continue M&A activities and strengthen alliances, again in support of our focused growth priorities of the software defined data center, hybrid cloud and end-user computing," Gelsinger said.

"Our aspirational goal is to become the greatest infrastructure software company of this decade -- $10 billion and beyond."

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