VMware: Executive churn, some layoffs

VMware is going through an annual ritual it calls “workforce rebalancing,” which has resulted in a few hundred employees being let go including with four senior executives, which might be concerning as executive churn is often a sign of trouble.

On Jan. 25, the California Employment Development Department disclosed that VMware had cut 159 people in the Palo Alto office earlier in January. For a company of more than 22,000, that’s nothing, although there were likely cuts in other offices around the world as well.

“We can confirm that there have been a limited number of changes to our workforce this month,” a VMware spokesperson said via email. “This is a part of regular workforce rebalancing that ensures resources across VMware’s global businesses and geographies are aligned with strategic objectives and customer needs. We have an active employee support program to ensure, where possible, impacted employees will be redeployed to open roles within VMware. We continue to recruit in areas of strategic importance for the company.

“We are committed to working together with impacted employees to ease the transition. This includes providing placement services and dedicated recruiters.”

There are 1,250 open positions on VMware.com’s career page, the spokesperson said.

That’s not very worrisome. In the Silicon Valley, most of those 159 people probably already have new jobs. The four executive cuts are more concerning, especially since these were all people in customer-facing positions.

Scott Bajtos, VMware’s global chief customer officer and an 11-year VMware venteran, Alexa Erjavic, senior director of global services strategy, Mark Ritacco, vice president of operations and customer intelligence, and Kate Woodcock, VMware’s vice president of customer advocacy, are all departing the company. The news was first reported by the Silicon Valley Business Journal (paywall).

Four senior executives in the customer-facing segment of the company is a pretty big blow. Rob Enderle, president of The Enderle Group, speculates that it was an internal dispute and said it was Bajtos who was the key departure and the others left in a show of solidarity with him.

“I’m not sure what the problem was. They are saying the departures are voluntary, which typically means a dispute to me. So this does read like there was a dispute, and the people being eliminated were on the wrong side of the dispute,” he said.

He added that VMware is pretty aggressive at eliminating people who underperform, no doubt a habit CEO Pat Gelsinger learned in his years at Intel, but it’s unusual to see a group of executives leave at once. He thinks Bajtos had a dispute with Gelsinger and came out on the losing end, which is an inevitable outcome given Gelsinger’s position and connections to Dell.

If it was a performance issue, that could come out when VMware reports earnings on February 27. Gelsinger will likely have to face some hard questions from Wall St. analysts on the earnings call as well.

“Losing a cross section of execs that are customer facing is going to hurt,” said Enderle. It’s going to create a certain amount of doubt. Customers know these people and trust these people. When you have a purge like this, it’s going to cause questions. It’s not like people will flee the product but it creates uncertainty, which is never good for a company.”