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​Scare for VMware as layoffs and profit cuts impact financials

​Scare for VMware as layoffs and profit cuts impact financials

Virtualisation vendor expects sales and profits in the coming year to be significantly below analyst forecasts, with staff cuts confirmed and a new CFO on board.

VMware CEO Pat Gelsinger

VMware CEO Pat Gelsinger

VMware expects sales and profits in the coming year to be significantly below analyst forecasts, with staff cuts confirmed and a new Chief Financial Officer on board.

That’s the gist of the company’s eagerly anticipated full year financials, which proved growing speculation around job losses to be correct with the cutting of 800 jobs, although not quite the 900 forecast.

With those jobs mainly expected to go in the company’s vCloud Air division - seen as a direct competitor to Amazon Web Services and Microsoft Azure - the virtualisation vendor expects to record restructuring costs of around $US55 to $US65 million in connection with the cuts.

In addition, CFO and COO Jonathan Chadwick is leaving the tech giant, to be replaced by Zane Rowe, CFO of EMC, VMware’s majority owner - effective March 1.

But the biggest concern for investors lies around the company’s reduced guidance forecast for 2016, which expects to post revenue between $US6.8 and $US6.9 billion, a hefty way short of analyst predictions of $US7.2 billion.

The knock-on effect is an expected 2016 profit of no greater than $US4.16 a share, again dropping below the $US4.20 forecast by analyst experts.

On the plus side however, in 2015, VMware’s end-user computing business grew over 30 percent year-over-year, bringing the total annual bookings run rate to over $US1.2 billion.

Coupled with this, the company’s NSX business, the network virtualisation and security platform for the software-defined data centre, grew over 100 percent year-over-year, bringing the total annual bookings run rate to well over $US600 million.

“VMware’s Q4 2015 was a solid finish to 2015,” says Pat Gelsinger, CEO, VMware.

“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.”

With Dell’s $US67 billion acquisition of EMC edging nearer by the month, the company finished 2015 with full year revenues of $US6.57 billion, an increase of nine percent from 2014.

“Our Q4 and 2015 results met or exceeded our revenue and operating margin expectations for the quarter and the year," Chadwick adds.

“We are seeing the results of our product transitions and have positive momentum with our newer solutions heading into 2016.”

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