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Like Others in the Tech Space, VMW Resorts to Layoffs

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VMware confirmed 800 layoffs

In the prior part of the series, we discussed VMware’s (VMW) recently announced fiscal 4Q15 and 2015 results. We also discussed the performance of new offerings that enabled the company to post double-digit revenue growth. However, the Dell-EMC (EMC) deal has increased uncertainties regarding VMware’s future, which was indicated by the soft future outlook provided by the company for 2016.

In its recent fiscal 4Q15 earnings release, VMware confirmed that it will cut 800 positions. This is less than the 900 the company had originally announced. In relation to these job cuts, VMware stated that it expects $55 million to $65 million in restructuring charges. Like others in the tech space, VMware followed the layoff route to keep a tab on its costs. VMware stated that the savings resulting from layoffs will be invested in “field, technical and support resources associated with growth products.”

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Though layoffs declined in the tech space in 2015, Microsoft and its peers kept layoff momentum high

The above presentation shows the historic numbers of US tech job cuts as reported by Challenger, Gray & Christmas, an employment consulting firm. Here, the technology sector encompasses computer, electronics, and telecom. The 79,315 layoff announcements in 2015 were significantly lower as compared to the 100,757 layoff announcements in 2014. Job cuts in 2014 reached their highest since 2009 when there were 174,629.

Overall in 2015, the tech sector accounted for 13% of the total 598,510 job cuts. Though job cuts in the tech space fell in 2015, announced job cuts by companies like Hewlett-Packard (HPQ), Microsoft (MSFT), Intel (INTC), and Unisys led to a 5% increase in job cuts from 59,528 in 2014 to 62,191 in 2015.

Investors who wish to gain broad-based exposure to VMware can consider investing in the First Trust ISE Cloud Computing Index Fund (SKYY). SKYY invests ~49% of its holdings in application software and ~3.1% of its holdings in VMW.

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