VMware stock slumps on missed estimates

Sales slowdown attributed to saturated enterprise segment, reduced government orders

Tags: VMware Incorporated
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VMware stock slumps on missed estimates VMware is set to shed 900 employees, stop pursuing some revenue streams and streamline facilities.
By  Stephen McBride Published  January 29, 2013

VMware Inc saw a share price drop of some 14% in extended trading following a forecast of less-than-expected revenues, Bloomberg reported today.

The California-based virtualisation market leader projected Q1 sales to reach between 1.17bn and $1.19bn, where industry analysts had on average estimated a figure of $1.25bn. According to a filing, VMware will shed 900 employees, stop pursuing some revenue streams and streamline its facilities. However the company is still in hire mode and CEO Pat Gelsinger said he expected to end 2013 with employee ranks swollen by 1,000.

The company attributed its weaker-than-expected projections to the jittery economic climate and a slowdown in federal government demand.

"The company's guidance was clearly disappointing," said Mizuho Securities USA Inc analyst Abhey Lamba, in a note to clients. "In particular, management's license growth expectations of 8% to 11% for the year are materially lower than expectations, as investors expected revenue growth acceleration in 2013."

VMware, which is majority-owned by EMC Corp, has been forced to trawl the SMB market as the enterprise segment becomes saturated, mostly with VMware products, according to Nomura Holdings Inc analyst Rick Sherlund. In reaching out to small business and facing competition from the likes of Microsoft and Oracle, VMware has been forced to drop its prices.

 

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