VMWare Stock Tumbles As CEO Ejected By Board

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VMWare announced this morning that the board and directors have asked CEO Diane Greene to step down as President and CEO effective immediately. Greene, an original founder of the VMWare company, will be replaced by Paul Maritz as President and CEO, and he has also been assign to the board of the company. Maritz was the founder of Pi Corporation, a cloud based storage and services provider that was acquired by EMC last year. Previously Maritz was the VP of Cloud Services at EMC, so the new role at VMWare is a step up into a much larger role and much larger business.

At the same time the company announced that while they are going ahead with their plan to announce earnings on the 22nd of July, they expect that the results will be below the guidance levels of 50% growth over 2007 revenues.

VMWare saw over $1.3B in revenues during 2007, an increase of 53%, but at current revenues their growth rate is expected to fall at around 40% over last year. VMWare faces a number of challenges to their business outside of maintaining their growth rate. Microsoft recently released virtualization technology as part of the new version of Windows Server. To push VMWare and others out of that market, Microsoft is retailing their Hyper-V virtualization product for as little as $25 per server license. With a competitor such as Microsoft now knocking on their door, VMWare have a lot to protect and a lot to lose.

On the advanced virtualization and platform side of the business, VMWare are seeing their revenues being eaten into by upstart companies such as BonBon and others. There was once a time where VMWare had a large lead in terms of both technology and market share, but in the past few years both those gaps have closed rapidly as numerous companies and other solutions have entered the market.

Related: VMWare: A Missed Opportunity For EMC?

  • Eric Willis

    Wow. This certainly came out of nowhere. Everything “seemed” to be roses at VMWare.

  • http://virtualization.com Robin Wauters

    There was something in the air before the US woke up:


    Our take on Diane Greene’s departure:


  • http://www.techcrunchit.com/ Nik Cubrilovic

    @Eric: I think this is just the beginning. That PE still looks really high to me, esp considering that they arent in their own market alone anymore

  • http://www.techcrunchit.com/ Nik Cubrilovic

    Thanks Robin

    I can’t help but think if EMC were really smart they would have capitalized a lot more on the frothy stock price – which they must have kown was over-valued. Surprised they didn’t offload more of VMWare – would have solved the control issues in the short-term as well

  • Steven Wagner

    Very surprising considering The Economist just did a love fest article about her this week.


  • http://www.techcrunchit.com/ Nik Cubrilovic

    Steve: Arrington read that a couple of days ago and told me it was a big puff piece, which he spotted even though he didn’t know a lot about the market. Need to read it myself

  • http://virtualization.com Robin Wauters


    Hmmm, the stock may have been overvalued significantly, but the technology VMware boasts certainly isn’t: it’s simply the best piece of virtualization technology around right now, period. It faces stiff competition business-wise (from Microsoft, Xen and KVM in particular), but not technology-wise (yet).

    EMC knew what it was getting into, it was a part financial/part technology buy from their part, but obviously they’re learning that their 86% stake punishes them as well when VMware financials go awry, or the CEO leaves for whatever reason.

    I’m particularly wondering what EMC will do know: try and stabilize the situation, spin-off VMware completely or sell a chunk of their share?

  • http://www.techcrunch.com/2008/07/08/vmware-drops-25-of-market-cap/ VMWare Drops 25% Of Market Cap

    […] in virtualization provider VMWare today dropped almost 25%, as growth expectations were lowered and founding CEO Diane Greene was replaced by the board. Prior […]

  • http://www.techcrunchit.com/ Nik Cubrilovic

    @Robin on the tech I agree, but the market is looking at the future not today. EMC is just far too VMWare heavy for them to keep the current arrangement, they will probably sell down more and more of the company when they can and when the timing is right (ie. not soon)

  • Eric Willis


    I agree in terms of the merit of the stock price based on eps, etc…and like you said, new entries into the market like Miscrosoft’s Hyper-V and other open source solutions are going to put pricing pressure on VMWare. I was just surprised about the departure of the CEO. From all I’ve read, there just didn’t seem to be any internal problems with management. However, when it’s time to report, and numbers are coming in at the very low end of the spectrum… that can be enough to cause internal problems. But I’ll admit I have not kept a very close watch on this. Thanks for the article.

  • Eric Willis


    I’ve read that same article and a few others. I guess that is why I’m so surprised because of all the “love-fest” type of articles that have been popping up about VMWare lately. Actually, the over-exuberant articles should have been enough to raise some questions….

  • http://www.infotron.estore-ltd.com/2008/07/09/vmware-drops-25-of-market-cap-ceo-out/ Infotron » Blog Archive » VMWare Drops 25% Of Market Cap; CEO Out

    […] in virtualization provider VMWare today dropped almost 25%, as growth expectations were lowered and founding CEO Diane Greene was replaced by the board. Prior […]

  • http://blogs.smugmug.com/don/ Don MacAskill

    Anyone could see this coming from a mile away. I think Nik is right – this is only the beginning.

    But Nik, while you mentioned Microsoft, you didn’t mention the other half of the equation. If Microsoft is the hammer, all the open-source stuff (Xen, xVM, VirtualBox, etc) are the anvil.

  • http://www.techcrunchit.com/ Nik Cubrilovic

    @Don: actually one thing that I forgot to mention in the next post which I intended is actually what you said there – in that it is usually Microsoft marketing money that opens the market up, but the better solutions that then slip through in the slipstream. Might not apply consumer-side but certainly does here.

  • http://is2b.com/?p=25 IS2B » Blog Archive » VMWare Drops 25% Of Market Cap; CEO Out

    […] in virtualization provider VMWare today dropped almost 25%, as growth expectations were lowered and founding CEO Diane Greene was replaced by the board. Prior […]

  • http://www.t7000.info/2008/07/vmware-drops-25-of-market-cap-ceo-out/ VMWare Drops 25% Of Market Cap; CEO Out | t7000

    […] in virtualization provider VMWare today dropped almost 25%, as growth expectations were lowered and founding CEO Diane Greene was replaced by the board. Prior […]

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