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Summary:

VMware shares took it on the chin Tuesday, a day after the company talked down its projected earnings for the next quarter.

VMware CEO Pat Gelsinger

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 report put it) down 4.56 percent to $24.05. Update: VMware shares closed the day at $77.14 per share, down 21..54 percent.

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.
VMW Chart

VMW data by YCharts

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.

 

This story was updated at 1:45 pm PDT with VMware’s closing share price.

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  1. Keith Townsend Tuesday, January 29, 2013

    Hmmmm. I’m going to sound like a broken record. I wondering out loud about EMC’s decision to change directions on PaaS. The hypervisor is becoming a commodity. Is VMware headed for a slow death?

  2. Yeah, why isn’t vSphere ESXi officially supported yet by VMware to run on all those Mac Mini server after the death of the Xserve and stagnation of the Mac Pro tower? c’mon Tim Cook, show more love to your pals at VMware!

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