Virtualization giant VMware is getting ready to announce layoffs even as Dell and EMC, which owns 80 percent of VMware, jump through hoops to make their $67 billion merger a reality.
Fortune is reporting VMware will cut up to 900 employees, which is about 5 percent of its global workforce, this week. VMware could not immediately be reached for comment, but some are speculating the layoffs may be related to the impending merger.
EMC plans to shave $850 million from its budget by cutting an unstated number of jobs, according to a regulatory filing at the end of last year. Most of the job cuts should be completed by the end of the first quarter and wrapped up by the end of the year. Some industry watchers believe the VMware cuts are a natural progression.
If the Dell-EMC deal announced in October goes through, it will be the largest technology merger in industry history. Immediately after the ink dries on the mega deal, the combined company will stand as a leader in the $2 trillion information technology market and tap into synergies in high-growth areas such as digital transformation, software-defined data center, hybrid cloud, converged infrastructure, mobile, and security.
The Business Is Changing
Fortune columnist Barb Darrow said that the changes “emanate from the difficulty Dell and EMC have had getting investors, especially VMware investors, to swallow this deal.” However, Zeus Kerravala, principal analyst at ZK Research, who has been watching the merger details unfold, told us he’s not sure the merger is behind the VMware layoffs.
“Obviously the global markets are a little soft right now. Almost every large tech vendor seems to be struggling. And there are currency issues,” Kerravala said.
Additionally, VMware’s core virtualization business has slowed down, he said. "A lot of people think VMware’s product has become somewhat of a commodity and certainly there’s more competition from Microsoft," Karravala said. "Some of the emerging areas, like the network virtualization market, haven’t grown like they thought it would. So the business is changing.”
Sharpen Your IT Skills
In her report, Darrow argued that there’s a growing perception that VMware's trading stock, which is part of the deal, won’t be worth enough to make shareholders whole in the merger despite its strong EMC undergirding. VMware is one part of the giant “EMC Federation” company. The so-called Federation also includes VCE, RSA Security and Pivotal.
“You could argue that perhaps some of the head count in the VMware layoffs could be related to the Dell-EMC merger, but from everything I understood the federation companies were supposed to run as they were,” Kerravala said. “I’d be surprised if a lot of the layoffs had to do with the merger.”
What doesn’t surprise Kerravala is that there’s a shift in the most valued IT skill sets. Thinking back to the mass layoffs that occurred when the technology world moved from mainframes to PCs, he said that IT workers should keep their skills current.
“If you are in IT, you need to be thinking about learning to program in some of the more modern languages, like Ruby and Python,” Kerravala said. “There’s a big shortage of data scientists today to work on analytics platforms. As we transition into this next era of IT, people need to make sure they are ready for where the market is going.”
Image Credit: VMware.