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July 9, 2008

EMC dumps VMware CEO

Posted by David Hunter at 10:10 AM ET.

The share price of VMware tanked yesterday when the virtualization software vendor and Microsoft competitor replaced its CEO, co-founder Diane Greene, with Paul Maritz, a former Microsoft executive:

VMware’s Board of Directors announced today that it has made a change in the leadership of the company with the departure of Diane Greene as President and CEO. VMware’s Board of Directors has appointed Paul Maritz as President and CEO of VMware effective immediately.

Paul Maritz retired from Microsoft in 2000, after 14 years there. During this period Paul managed the development and marketing of many of the company’s major products, including such major releases as Windows 95, Windows NT, Database, Tools and Applications.

In 2003, Paul founded Pi Corporation, a startup software company focused on building Cloud-based solutions for new ways of doing personal information management. Pi Corporation was acquired by EMC in February 2008, and Paul became President of the EMC Cloud Division.

EMC owns 87% of VMware and EMC CEO Joe Tucci is the chairman of the VMware board so it is more precise to say that EMC replaced Greene. No one is formally offering any explanations for Greene’s departure, but a clue may lie in the earnings miss hinted at in the announcement:

VMware expects to announce earnings for the quarter ended June 30, 2008 as scheduled on July 22, 2008 at 2pm PDT. On that call Paul will make observations about the second half of 2008. While VMware is not updating guidance for Q2, we expect revenues for the full year of 2008 will be modestly below the previous guidance of 50% growth over 2007.

Still, nearly 50% revenue growth in today’s economic environment would be something that most boards of directors would be ecstatic about, which leads observers to suspect it was merely an excuse for Tucci to exercise his longstanding animosity towards Greene or to halt her intense lobbying for EMC to spinoff VMware.

Whatever the reason, VMware fired their very successful coach just as Microsoft’s Hyper-V team took the field which is hardly a winning game plan.

Update: Another theory – VMware’s CEO switch targeted at Microsoft, analysts say. The presumption is that Paul Maritz can handle competition with free and "good enough" better than Greene. Maybe, but it’s going to be tough for anyone. One interesting factoid:

Nine out of 10 guest operating systems that run on VMware are Windows servers, notes Burton Group analyst Richard Jones.

Filed under Coopetition, Hyper-V, Microsoft, VMware, Virtualization

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