VMware Misses on Guidance, Says 900 Lay-Offs Coming

Andrew Klips |

VMware Misses on Guidance, Says 900 Lay-Offs ComingSoftware provider VMware Inc. (VMW) topped analyst expectations with its fourth-quarter earnings report after Monday’s closing bell, but whiffed on its outlook for the year, citing softness in U.S. markets related to federal government bookings.

For the fourth quarter, the Palo Alto, California-based company reported revenue of $1.29 billion, up 22 percent from the year prior quarter.  Net income was $205.77 million, or 47 cents per share, compared to $200.43 million, or 46 cents per share, for the fourth quarter of 2011. Adjusted net income for the quarter, which excludes items like tax adjustments and stock-based compensation, totaled $349 million, or 81 cents per share, up 31 percent from $266 million, or 62 cents per share, for the fourth quarter of 2011.

Analysts were expecting revenue of $1.28 billion and earnings of 78 cents per share.

For all of 2012, revenue increased 22 percent from 2011 to $4.61 billion.  Net income for 2012 was $746 million, or $1.72 per share, compared to $724 million, or $1.68 per share, for 2011. Non-GAAP net income for 2012 was $1.24 billion, or $2.85 per share, compared to $936 million, or $2.17 per share, for 2011.

Those numbers were fine, but the company’s guidance disappointed.

VMware expectes annual 2013 total revenues to be in the range of $5.23 billion to $5.35 billion, an increase of approximately 14 to 16 percent from 2012, and annual license revenues are to grow between 8 and 11 percent.  First quarter 2013 total revenues are expected to be in the range of $1.17 billion to $1.19 billion, an increase of approximately 11 to 13 percent from the first quarter 2012.

Analysts were expected the company to post revenue of $1.25 billion in the first quarter of 2013 and $5.42 billion for the year.

Further, in an 8-K filing with the SEC, VMware disclosed that it has approved a “plan to streamline its operations,” including cutting about 900 jobs in low-priority areas, such as its SlideRocket presentation software, and exiting “certain lines of business and consolidation of facilities” by the end of 2013.  The combined moves are expected to result in charges totaling between $90 million and $110 million.

Carl Eschenbach, Chief Operating Officer at VMware, added that the company also intends to hire more people in its high-priority areas throughout the year; actually increasing the staff by about 1,000 by the end of 2013.

The outlook miss sent shares downward by as much about 15 percent in extended trading on Monday to a four-month low of $83.55.  During regular hours, shares of VMW were off by less than 1 percent at $98.32.

Shares of EMC Corp. (EMC), which owns the majority interest of VMware, also stumbled with the report.  EMC is in focus on Tuesday, not only for sympathetic movement related to VMware, but also because the company reports earnings of its own.

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Symbol Name Price Change % Volume
CERE Ceres Inc. n/a n/a n/a 0
EMC EMC Corporation n/a n/a n/a 0
VMW Vmware Inc. Class A 73.34 0.14 0.19 1,140,302


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