VMware to cut jobs, disappoints with 2013 outlook

Mon Jan 28, 2013 7:48pm EST
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(Reuters) - Software maker VMware Inc plans to cut about 7 percent of its workforce as part of a restructuring, and it gave a cautious outlook for 2013 due to a decline in U.S. federal government spending and the likelihood of more tough economic times in Europe.

The company's shares fell 14.6 percent in after-hours trading.

VMware Chief Executive Pat Gelsinger said on a call with analysts on Monday that the company would focus on its most popular products and would scale back in some areas of the business while putting more emphasis on certain geographies, product groups and operations.

Chief Financial Officer Jonathan Chadwick said that strategy included shifting some people to new roles as well as cutting 900 jobs, resulting in a charge of $90 million to $110 million. Most of that would be taken in the first quarter, he said.

Despite the cuts, Gelsinger said that "we will continue to grow, invest and hire in 2013 in support of our focused growth priorities." As a result, he added, by the end of the year VMware's headcount would be "up by approximately 1,000 people."

He also said that VMware, a publicly traded division of data storage equipment maker EMC Corp, would continue to pursue mergers and acquisitions.

The company said it would provide more detail on March 13, at the EMC VMware Strategic Forum.

At that time the two companies also plan to give details on their so-called Pivotal Initiative, aimed at merging the data analytics and cloud application assets of the two companies.

U.S. WEAKNESS   Continued...