Apple, Google and now VMware -- three of the most successful and profitable companies of any market in the world -- have something new in common: Even as they continue to rake in record revenue and profits, Wall Street punishes them where it hurts -- in the stock price, and thus, their capital value.
A week after Google and Apple posted record financial numbers and then watched their stocks slide, VMware on Jan. 28 did the same, showing a double-digit gain in earnings for Q4 2012 while watching the stock tumble 14 percent after the closing bell.
This stock dip was all about VMware's forecast for the current period, which came in below analysts' forecasts. At 3:30 p.m. Pacific time Jan. 28, VMware common stock was selling at $83.89, down 14.7 percent from the closing-bell price of $98.32.
In its fiscal Q4, which ended Dec. 31, VMware reported net revenue of $206 million (47 cents per stock share) compared to net income of $200 million (46 cents per share) for the same period in 2011.
Fourth-quarter revenue grew 22 percent to $1.29 billion. Analysts were expecting earnings of 78 cents a share on revenue of $1.28 billion, which was on target. But the company projected revenue for Q1 2013 to come in between $1.17 billion and $1.19 billion, substantially below analysts' projection of $1.25 billion.
VMware also revealed that it plans to cut 900 jobs as part of a restructuring plan, adding that it would take a charge of between $90 million and $110 million related to the job cuts and exiting some lines of business. One of those is online presentation provider SlideRocket, which VMware described as "not central to the needs of customers."
On a conference call with analysts, CEO Pat Gelsinger said that VMware is in the process of "realigning resources, scaling back in some in some areas, increasing prioritized investments ... shifting talent to new roles ... as well as (making) some targeted headcount reductions."
Overall, Gelsinger said, VMware has added 6,700 people over the last three years and expects to hire about 1,000 new people in 2013.
License revenues for 2012 were $2.09 billion, an increase of 13 percent from 2011. Service revenues, which include software maintenance and professional services, were $2.52 billion for 2012, an increase of 31 percent from 2011.
The company projected annual 2013 total revenues to be in the range of $5.23 billion to $5.35 billion, an increase of about 14 to 16 percent from 2012. Annual license revenues are expected to grow between 8 and 11 percent, VMware said.