It has emerged that VMware, Inc. (NYSE:VMW) is the process of trimming its global workforce by as much as 5%. That means that about 900 employees will be shown the door in a layoff move that seems to be inspired by the pending EMC Corporation (NYSE:EMC)-Dell union. VMware officials have declined to deny or confirm that a mass layoff is impending. But sometimes you don’t expect companies to discuss sensitive issues in public.
VMware, Inc.(NYSE:VMW) is owned 80% by EMC, which on its part is already reducing its headcount. EMC layoffs are expected to cost $250 million in severance packages and related issues. The fact that EMC is eliminating jobs ahead of the tie-up with Dell makes layoffs at VMware a logical speculation. Recent months have been characterized by reorganization moves at EMC, whereby the company is reshuffling leaderships at some of its units and tightening grip on subsidiaries that previously more independent.
Efforts to meet pre-deal targets
It seems as though EMC is trying to meet certain revenue or profit targets agreed with Dell before the companies can merge in the $67billion buyout deal. However, because EMC is finding it difficult to grow revenues and profits in the normal way, the company is looking at cost-cutting to help it reach the agreed performance targets. That appears to be the reason behind job cuts at VMware.
900 positions to be axed
VMware, Inc.(NYSE:VMW)’s website shows that it employs 18,000 people globally. As such, eliminating 900 positions would see the company wipe out 5% of its worldwide headcount. It is currently not clear what it would cost the company to cut that number of jobs, but there is no doubt there will be long-term cost-benefits in layoffs.
VMware, Inc.(NYSE:VMW)is cited as one of the most exciting assets Dell is set to reap from the acquisition of EMC. There are speculations that Dell is keen to revamp VMware and later sell it a profit. However, that school of thought doesn’t seem to sit well with VMware investors. Generally, EMC is struggling to get its shareholders to like its marriage with Dell.