VMware has cut raises and is suspending 401 (k) retirement fund matches for its employees due to the COVID-19 crisis, according to a story by Business Insider, which also reported on Tuesday that CEO Pat Gelsinger and other members of the executive team are taking salary reductions and that the company is shifting from a semi-annual to annual bonus plan.
Citing a memo to VMware's 31,000 employees, Business Insider reported that VMware would delay its annual promotion review cycle.
Gelsinger and the executive team will take salary cuts in the company's fiscal second and third quarters "to support efforts to manage through the current economic uncertainty."
"The global economy is facing serious challenges brought on by the COVID-19 pandemic, and the overall economic outlook remains uncertain," said the memo from Chief Financial Officer Zane Rowe and Chief People Officer Betsy Sutter, according to Business Insider. "Many of our customers are under financial pressure...They remain cautious in their short- and mid-term investment plans, and that means VMware must also be thoughtful and prudent as we navigate the next several quarters."
Business Insider said that VMware spokesperson Michael Thacker confirmed "there have been a number of cost management changes impacting the VMware workforce."
VMware pioneered virtualization through the use of virtual machines. Over the past few years, VMware shifted its focus to include cloud technologies, such as the Kubernetes container management system and solutions for telcos.
In its fourth quarter earnings report in February, VMware's revenue was $3.07 billion, which was an increase of 11% from the fourth quarter of fiscal 2019, which just beat Wall Street's projection of $2.95 billion in revenue. For the full fiscal year, VMware's non-GAAP net income was $2.66 billion, or $6.24 per diluted share while revenue came to $10.81 billion, an increase of 12% from fiscal 2019.
On the company's fourth quarter and full year fiscal 2020 earnings call, Gelsinger said his company uncharacteristically failed to close several large deals in the fourth quarter, including one "very large deal" that closed one hour after bookings were cut-off. Gelsinger said VMware's focus on closing its $2.7 billion deal to buy Pivotal Software in December was partly to blame for the failure to close some of the deals.