VMware Tosses Its CEO As Microsoft Closes In

(MoneyWatch)  VMware on Tuesday swapped CEOs and said that its revenue growth would fall short of expectations.

In a statement, VMware said that CEO Diane Greene has departed. She will be replaced by Paul Maritz (right) effective immediately. Maritz will also be president and sit on VMware's board. Maritz had been president of EMC's cloud infrastructure and services division. Maritz retired from Microsoft in 2000 and had managed the development and marketing of the software giant's key products, including Windows 95 and Windows NT.

As for the revenue outlook, VMware said that it expects revenue for 2008 to "be modestly below the previous guidance of 50 percent growth over 2007." Wall Street was expecting revenue growth of about 51 percent to about $2 billion for 2008. For the second quarter ending June 30, VMware is expected to report earnings of 23 cents a share, according to Thomson Financial. For 2008, VMware is expected to report earnings of $1.04 a share.

Since going public, VMware has had a lumpy quarter, but for the most part has been a relative technology darling as the march to virtualize technology infrastructure continues. It's unclear why Greene is departing another quarter of weaker than expected revenue growth couldn't please VMware's parent EMC. Joe Tucci, chairman of VMware and EMC, said that Maritz's has the track record "to lead VMware to its next stage of growth and development." The subtext: Greene couldn't get VMware there.

The timing of Greene's departure is notable. Microsoft is rolling out its Hyper-V effort, which isn't as good as what VMware offers, but good enough to cause some serious disruption to the virtualization market. Meanwhile, VMware has been sealing long-term deals with customers to protect its turf. Given the impending threat to VMware perhaps it only makes sense that the virtualization software company would recruit a Microsoft alum to move it forward.

In any case, the market didn't take the news very well -- knocking VMware down about 30 percent.


Larry Dignan is Editor in Chief of ZDNet and Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations.
Credit: ZDNet