Sweeping layoffs to hit VMware amid Dell-EMC merger worries

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Word has leaked that VMware Inc. plans to lay off as many as 900 employees this week, or about five percent of its global workforce, as part of an effort to trim operations. The move is reportedly timed to coincide with its third quarter earnings call on Tuesday, which will be closely watched by a market that is growing increasingly anxious over the recent decline in its trading performance.

The virtualization giant’s shares have lost roughly 40 percent of their value since its previous financial report in October, when underwhelming sales numbers led multiple analyst firms to downgrade their ratings on its stock. But the start of the fall traces back a few weeks earlier to the announcement of the merger between parent company EMC Corp. and Dell Inc. for $67 billion. In a tacit acknowledgement of Wall Street’s concerns about the difficulty of effectively combining their massive workforces, both vendors embarked on major restructuring initiatives shortly after the news crossed the wire.

Michael Dell began shopping his firm’s software and professional services divisions to private buyers, while the storage giant put in the paperwork for a sweeping workforce reduction. If the new reports are accurate, the forthcoming cuts at VMware are set to bump the total layoff tally past the 1,100 mark. But there’s a reason to believe that the worst is still to come. EMC said in its filing that it expects to incur $250 million in termination costs, which means that thousands of additional employees will join their soon-to-be-axed colleagues from the virtualization giant on the job market by the time that the merger is complete.

The bulk of the layoffs will likely occur at the company’s core storage business, which is both the largest and slowest-growing part of its federation. That should provide some measure of comfort for the remaining employees at VMware and other fast-growing EMC units like converged infrastructure specialist VCE, where more than 250 workers were issued pink slips a few weeks ago.

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