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VMware ready to drop the axe on vCloud Air, Fusion groups

This blog post is part of our Essential Guide: Chronicling the Dell-EMC merger news

By Ed Scannell and Nick Martin

The bloodletting at VMware has begun.

Reports published over the past several days about the company laying off as many as 900 of its 18,000 or so employees are proving correct, as dozens of affected workers are posting about their experiences on a message board.

The groups taking the biggest hit appear to be the vCloud Air, Fusion and Workstation groups, the latter focusing on end-user virtualization. The entire Fusion and Workstation groups are “gone” as of yesterday (Monday), according to one anonymous VMware employee. Reportedly, VMware is moving all Fusion and Workstation development to China.

Already confirmed today is the company will close its Burlington, Canada technical support center where 100 employees will lose their jobs.

The cuts made to vCloud Air may reflect the company’s decision in late November to scrap the 50-50 joint venture with EMC to pull together a more cohesive hybrid cloud strategy. Besides vCloud Air, the joint venture was to be made up of Virtustream, which EMC acquired for $1.2 billion last May, plus VCE’s Cloud Managed Services and EMC’s Storage Managed and Object Storage services.

EMC, which owns about 80% of VMware, announced in a SEC filing late last month its intention to lay off an unspecified number of employees over the course of 2016. According to sources familiar with EMC’s plans, the company could let go as many as 20,000 of its 100,000 or so employees by the end of this year.

Analysts and other industry observers have speculated since late last year that Dell, EMC and VMware — particularly the first two — would have to sell off parts of their respective businesses or consolidate groups across the companies, including through layoffs, to raise enough cash to finance the $67 billion deal. In November, the company was reported to be facing a whopping $9 billion tax bill, which further cast doubt on the deal being approved by shareholders and the companies’ respective boards of directors.

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