All that talk by VMware about slimming down and focusing and prioritizing key products apparently didn’t do the trick because the stock was slammed on Tuesday,
As of 11:39 a.m. PDT, VMware shares were trading at $77.98, down nearly 21 percent from Monday night’s close of $98.32. VMware parent company EMC, which announced its fourth quarter earnings Tuesday morning was also hurt (guilt by association, as one wag put it) down 4.56 percent to $24.05.
On its fourth quarter earnings call Monday, VMware CEO Pat Gelsinger said the company would cut 900 jobs in some areas as it de-emphasizes non-core products. But he also expected overall headcount to be up 1,000 over the next year. The company also talked down estimates for the upcoming first quarter, projecting revenue to come in somewhere in the $1.17 billion to $1.19 billion range when analysts had expected $1.25 billion.
In a research note, Nomura Securities analyst Rick Sherlund wrote that “the growth challenges facing VMware … have gotten progressively worse over the past year.”
VMware does face more competition in its legacy (and core) server virtualization business from Microsoft Hyper-V, Xen and KVM hypervisors. It is trying to push more upstream into higher end virtualization management tools and into network virtualization and software-defined networking.