Vmware CEO sacking takes market by surprise

STORAGE GIANT EMC surprised the market on Tuesday by firing Diane Greene, co-founder and chief executive of Vmware, in which the company holds an 85 per cent stake.

The move came at a time when there was much analyst whispering and rumour-mongering about EMC wanting to sell its shares in the market-leading virtualisation software company, something which it now appears EMC clearly does not want to do.

EMC quickly named Paul Maritz, former number three at Mightysoft, to take Ms Greene’s place. According to unnamed sources dredged up by the New York Times, Greene was purportedly fired because she had been pushing just a little too hard for Vmware to be spun off by the beginning of 2009. This would be exactly five years after the company was snapped up by EMC in December 2003 for $635 million, allowing the firm to be sold off in a tax-free deal.

Apparently, Greene refused to go quietly into that good software night, turning down options to take another job within Vmware or just resign without making a fuss.

Diane Greene: Well I didn't see that coming

Hours after Greene’s termination went public, Joseph Tucci, EMC’s CEO, went on the record to say Greene’s replacement had "nothing to do" with her advocacy of a Vmware spin off, and also noting that EMC had, "no plan to change the relationship with VMware", meaning the firm would maintain its independent status.

Despite noting that Maritz, who in 14 years at the Vole Hole led product development and marketing groups including Windows, was the man to, "lead VMware to its next stage of growth and development", shareholders didn’t seem particularly convinced. Vmware shares plummeted a whopping 24 per cent from $53 down to $40.19. EMC too had to deal with a backlash as its shares dropped 12 per cent.

Worse news came when Vmware released a statement revising its predictions on company revenue growth for 2008 to "modestly below" its previous estimate of 50 per cent. Last year the company’s revenues grew by an impressive 88 per cent to $1.33 billion, pulling in a profit of $218 million, double that of the previous year.

But now, with the hit to its share prices, the company has lost almost $5 billion in value in the space of a day, making a potential spin-off suddenly look like it wouldn’t be such a great idea after all.

CEO of Parallels, one of Vmware’s competitors in the virtualisation space, Serguei Beloussov, sent the INQ his reactions to Ms Greene’s sacking, noting that, "Diane has brought VMware this far, and evidently she has done a great job, establishing the company as a market leader and launching one of the biggest IPOs of recent years."

He noted, however, that the virtualisation space was now coming to a point where change was inevitable with more competitors - including the likes of the Vole which has just launched its own hypervisor - making huge strides in market education.

Beloussov said, "Vmware is now going to begin to see serious competition, and this really marks the next chapter in the company’s story."

Of Paul Maritz, Beloussov said he wondered whether his experience in cloud computing would have an impact on the direction the company moves in.

He added, "We see the cloud model, including software-as-a-service and hosting, playing a prominent role in the future of IT and virtualisation will help enable this evolution."

Obviously, not having her head in the clouds didn’t pay of for Diane Greene. µ

L’Inq
New York Times