Shakeup at VMWare; Shakeout Next?

Bad blood between Diane Greene and parent company EMC over VMware's direction finally boils over. Former Microsoft exec is the new CEO.

Diane Greene, who co-founded virtualization darling VMware (NYSE: VMW) in 1998 with husband Mendel Rosenblum and led its successful IPO, has left the company in an abrupt departure that has the industry abuzz.

The news was announced by the company's board of directors today and carried all markings of a CEO who appeared to be pushed out by VMware's parent company, EMC (NYSE: EMC).

In announcing that it had "made a change in leadership" with the departure of Greene as president and CEO, VMware's board announced that Paul Maritz, a former Microsoft executive and underling of CEO Steve Ballmer, would take over as new president and CEO.

The company also said that revenues for the full year of 2008 would be "modestly below the previous guidance of 50 percent growth over 2007."

News of Greene's abrupt departure, along with the vague earnings warning, sent shares of VMware tumbling by more than 27 percent to $38.65 during regular trading today. Shares of EMC fell by more than 10 percent to $13.59.

Joe Tucci, chairman of EMC and of VMware's board of directors, thanked Greene in a statement, saying she "guided the creation and development of a company that is changing the way that people think about computing." The statement then turned to praise for her successor, calling Maritz a "leader in the software industry.

"He has decades of experience building one of the greatest franchises in software history, Windows," Tucci's statement said. "Paul was instrumental as part of the core executive leadership team in building much of Microsoft's success."

During his 14-year tenure at Microsoft, Maritz worked on Windows 95, Windows NT, Database, Tools and Applications. He left to found a cloud computing start-up, Pi, which EMC acquired in February 2008. He then became president of EMC's cloud division.

Clash of cultures?

Greene's departure had the industry buzzing today over her management style, strategy differences with EMC, and what the new leadership means for the virtualization sector in general.

Greene was constantly at loggerheads with EMC, which bought her company for $635 million in 2004. This was because of her protectiveness towards the company she and co-founder Mendel Rosenblum, her husband and VMware's chief scientist, had built.

"Diane has very strongly maintained VMware's almost complete independence from EMC, which is totally unique in EMC acquisitions," Illuminata analyst Gordon Haff told "I strongly suspect that a factor here was the degree of independence that VMware could enjoy."

A spokesperson for VMWare declined comment and EMC was not immediately available for comment beyond the company press release.

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