EMC's Tucci: VMware CEO Greene Ousted For Lack Of Operational Experience

The executive shakeup at VMware should not be interpreted to mean that EMC is changing the way it is handling VMware, especially in terms of share ownership, says EMC and solution providers close to the server virtualization software market leader.

Diane Greene, president, CEO, and co-founder of VMware, left the company Monday and was replaced by Paul Maritz, a former Microsoft exec who joined EMC when that company acquired software startup Pi Corp. in February.

Maritz has also joined the VMware board.

Storage giant EMC, which acquired VMware in 2004, holds an 85-percent stake in the company despite spinning off part of it in a successful IPO last August. Joe Tucci, chairman, president, and CEO of EMC, is also chairman of VMware's Board of Directors.

EMC will encourage VMware to grow as a separate entity, and currently has no plans to change the previously-disclosed VMware ownership structure, an EMC spokesperson said.

Tucci told Reuters news service Tuesday that Greene was replaced because VMware's board wanted someone with more operational experience to lead the company into its next growth stage. "

Tucci also said he had asked Greene to take another position within VMware, but that she declined.

VMware also warned on Tuesday that it expects its 2008 revenue growth to be "modestly below" the 50 percent growth that had been previously estimated. Tucci told Reuters that it was a result of a tough economy that he said will not be improving soon.

Growth of under 50 percent is the kind of bad news that is easy to live with, said solution providers who estimated little or no impact to the channel from Greene's departure.

Gordon McKemie, owner of Ohio Valley Storage Consultants, an Anchorage, Ky.-based solution provider and partner of both EMC and VMware, said he respects both companies, but he is not surprised something like this happened.

McKemie said he believes that prior to VMware's IPO last year, Greene had put an ultimatum in front of Tucci to create a trading stock for VMware to unlock its value, resulting in a clash between a well-oiled machine like EMC and a fast-growing company like VMware.

"After EMC acquired VMware, VMware maintained a good deal of openness and independence," McKemie said. "EMC may be angry because VMware let other [storage] vendors with competing technology like Compellent Technologies slip in. It's like a baseball with a tight seam and one of the strings starting to unravel."

John Murphy, executive vice president of Advanced Systems Group, a Denver-based solution provider, said the only surprise is how negatively the stock market reacted to the news.

VMware's stock prices plunged on the news of Greene's departure from $53.19 at the opening bell to as low as $36.51 before climbing back to $40.19, ending the day down by 24.4 percent.

"How long does a CEO and founder stay on in that role after being acquired?" Murphy said. "Don't forget, EMC bought VMware and spun it out, but still has about 85 percent of the company."

Murphy said he expects little or no impact to the channel from the news. "VMware is still the standard in server virtualization," he said. "It might take some impact from Microsoft's moving into the market, and Xen is not going away. But VMware is still the standard. I don't see this news impacting any short-term deals."

Michael Paynter, managing partner at Tier 3 Technologies, a Louisville, Ky.-based VMware partner and business continuity solution provider, said that he suspects that changes at VMware are related to that company's lack of a managed services strategy.

"One thing people are talking about is VMware's reluctance to move into the managed services provider model," Paynter said.

Steve Kaplan, vice president of the data center virtualization practice of INX, a Houston-based solution provider, said that Greene was a great leader for VMware, and that Maritz has a great reputation from his Microsoft days.

"I'm sure VMware will go ahead just as strong," Kaplan said. "It's a very tightly-run organization. Its channel will stay on the right track. We just see only continued growth from VMware, and we're very, very optimistic about our VMware business."

Maritz's move to take over as president and CEO of VMware leaves a hole in EMC, where he was president of EMC's Cloud Division. The EMC spokesperson said that EMC currently has no plan to fill that position, but instead has a number of senior leaders who will continue the company's push into cloud computing. Maritz will be available to provide strategic guidance regarding EMC's cloud computing initiative, the spokesperson said.

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