News

posted on 08 July 2008 14:31

Like a bolt of lightning EMC subsidiary VMware has has issued a fiscal 2008 revenue shortfall, ousted its CEO and president Diane Greene, and replaced her with ex-Microsoft executive Paul Maritz, who was heading EMC's cloud computing business unit.

VMware said its revenue would drop a little below its original 50 percent year-on-year growth from fy07's $1.3 billion. VMware shares plunged 26 percent after the announcement. The company will report quarterly earnings for the second calendar on July 22.

Is this a resignation or sacking? Did she fall on her sword or was one stuck in her? The common view will be that it is a sacking as the board replaced her. It would have been EMC head Joe Tucci who wielded the knife, EMC owning 86 percent of VMware stock. He 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 that people think about computing. The Board thanks her for her considerable contributions to VMware and wishes her every success in the future."
No official reason was provided for her departure. It appears that the thinking is, 'You've done well girl, but not well enough, and VMware is so important to EMC, particularly with Hyper-V arriving, that we can't afford any revenue momentum stumble.'

According to a Fortune article Greene's year-long contract with VMware ended this month. Perhaps it was simply not renewed.  The arms length separation between VMware and EMC's storage business quietened concerns in VMware's other storage customers and partners. If that separation were to be lessened then those customers and parners' loyaties to VMware would be stretched and Hyper-V benefit.

Concerning Paul Maritz, Tucci said: "VMware is in a tremendous position to extend its lead in the virtualization market. VMware's Board of Directors is very pleased to be able to appoint an executive with Paul's experience and track record to lead VMware to its next stage of growth and development. 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."

Let's suppose VMware's revenue growth was 45 percent instead of fifty percent; that would be a slap on the wrist job surely, not a reason for ousting the CEO. Some people might conclude that there is more to Diane Greene's leaving than a slight drop in growth. Maybe EMC is more concerned about Hyper-V than it is letting on. Maritz' Microsoft experience might strengthen that idea, with him fighting the devil he knows.

There will surely be a hiatus in the development of EMC's cloud storage offerings.

There has been recent analyst speculation that EMC could spin out VMware next year as the tax situation would be more favourable.

^{[Chris Mellor.]}