Why VMware Shares Got Walloped


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of virtualization software specialist VMware plummeted 21% today after issuing guidance that disappointed Wall Street.

So what: VMware's fourth-quarter results managed to top estimates -- adjusted EPS of $0.81 on revenue of $1.29 billion -- but downbeat first-quarter and full-year guidance reignites concerns over slowing growth. Naturally, shares of parent EMC , whose stake in VMware accounts for roughly 60% of its own value, are also falling on the gloomy outlook.

Now what: VMware now sees first-quarter revenue of $1.17 billion-$1.19 billion and full-year 2013 revenue of $5.23 billion-$5.35 billion, below the consensus of $1.25 billion and $5.42 billion, respectively. "We see a tremendous market opportunity in 2013 and beyond," CEO Pat Gelsinger reassured investors, "as we focus on what our customers value most: VMware's role as a pioneer of virtualization technologies that radically simplify IT infrastructure from the data center to the virtual workspace." Of course, given VMware's weak outlook for 2013 and management's plan to cut about 900 jobs, or 7% of its workforce, don't expect the stock to turnaround to come quickly.

Interested in more info on VMWare? Add it to your watchlist.

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The article Why VMware Shares Got Walloped originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends VMware. The Motley Fool owns shares of EMC and VMware. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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