Greene out, Maritz in at VMware

Server virtualization pioneer VMware Corp. on Tuesday announced the departure of president and CEO Diane Greene, shocking some industry observers and sending its stock tumbling by almost $15 a share to the $39 range.

The precise circumstances of Greene’s departure were not immediately clear in the statement issued by the company.

VMware did not explicitly correlate the announcement with another piece of news it revealed Tuesday — that it expects full-year 2008 revenues to be “modestly below” its previous estimate of 50 per cent growth over 2007.

Greene will be replaced by Paul Maritz, a former Microsoft executive and founder of cloud computing company Pi Corp. EMC Corp. – the company that acquired, then spun off VMware in a wildly successful IPO last year — bought Pi earlier this year, making Maritz president of its cloud division.

“It was something of a shock,” said John Sloan, senior research analyst with London, Ont.-based Info-Tech Research Group, who covers the virtualization market. “It’s certainly going to be a big change. Diane Greene was a founder of the company.”

In a statement, chairman of VMware’s board of directors Joe Tucci said: “As one of the founders and the leader of VMware, Diane guided the creation and development of a company that is changing the way people think about computing.”

Of Maritz, Tucci said, “Paul is a leader in the software industry. He has decades of experience building one of the greatest franchises in software history, Windows. Paul was instrumental as part of the core executive leadership team in building much of Microsoft’s success.”

Sloan speculated that while VMware has had a great product and a very successful run, “they’ve never really been in a knock-down, drag-out with a big competitor.” With Microsoft’s Hyper-V hypervisor now out of beta, VMware now faces a three-horse race with Redmond and with Citrix’s Zen hypervisor.

“Maybe it’s a case of a new coach for a new ball game,” Sloan said.

Sloan said he wasn’t sure what, strategically, was more significant in Maritz’s resume – that he’s a cloud computing pioneer, or that he spent 14 years with Microsoft, retiring in 2001.

VMware has been talking about “the liberation phase” of virtualization, wherein virtual machines are freed from the enterprise data centre and become a cloud service. Maritz’s experience “augurs well” in terms of the direction the technology is taking.

On the other hand, his insight into the development of Microsoft strategy might be the more valuable asset.

“VMware is a company that’s very much in Microsoft’s crosshairs,” Sloan said.

David Lynch, vice-president of marketing with Ottawa-based virtualization lifecycle management software firm Embotics Corp., said while the cloud experience may be useful in the long term, Maritz’s strategic insight into the competitiveness in the market — VMware is “being hit from all sides (with) significant competitive attacks,” he said — is more significant in the short-term. That background will help formulate the strategic direction. “And that’s what’s needed right now,” Lynch said.

The question that lingers, though — did Greene jump or was she pushed? — will have an ongoing affect in the company.

“It’s never something that happens easily,” Lynch said. “And I think this going to be a tricky one.

“This is going to affect morale in the organization … that can potentially have a domino effect on practicall all the management staff.”

Lynch said Maritz will have to look at strategic issues — relationships with partners, the Microsoft issue, speed-to-market with new features — and make some moves quickly.

“The only way Paul can win is to come out with some strong strategic changes right our of the gate,” Walsh said. One area to look at: The company’s strategy with regard to acquisitions. After the IPO, the company was sitting on huge market capitalization and should have been more aggressive on the acquisition front, Lynch said. But Greene, with a technology background, preferred to lead by building, not buying.

“I think that’s cost them.” Lynch said.

At press time, VMware had not responded to an interview request.

— With files from Chris Kanaracus, IDG News Service (Boston Bureau)

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