New York Times Looks Under VMware’s Hood

9/9/08Follow @wroush

If EMC CEO Joe Tucci’s dismissal this summer of VMware founder Diane Greene was intended to shore up investor confidence in the Hopkinton, MA, company’s once high-flying virtualization subsidiary, it backfired: VMware’s stock has been trading this week at roughly $35 per share, down about 33 percent from its price before Greene’s firing was announced on July 8, and far below the record of $124 reached last Halloween. And the pummeling continues: a story in today’s New York Times, based largely on interviews with unnamed sources inside EMC (NYSE: EMC), details the infighting that led to Greene’s firing—the fallout from which now includes the departures of three more key VMware executives.

The executives leaving Palo Alto, CA-based VMware (NYSE: VMW) are Paul Chan, vice president of product development, who resigned in August; Richard Sarwal, the executive vice president of research and development, whose exit VMware announced last week; and most recently, chief scientist Mendel Rosenblum, Greene’s husband and the co-founder of VMware, who disclosed Monday that he will return to his professorship at Stanford’s Department of Electrical Engineering.

The Times story offers several theories to explain the frosty relations between Tucci and VMware’s founders, including VMware earnings growth that wasn’t keeping pace with expectations, Greene’s comments to a reporter about EMC’s alleged stinginess with stock options prior to VMware’s 2007 IPO, and the VMware founders’ entrepreneurial drive, which, in the view of one analyst quoted by the Times, was out of place within a company as large as EMC.

The article also details the challenges that face VMware’s new CEO, Paul Maritz, who was handed the subsidiary’s reins only months after joining EMC from Seattle-based Pi to head the storage giant’s cloud computing efforts. Aside from stopping the company’s rapid brain drain, Maritz may have to reposition VMware’s virtualization products to compete with cheaper alternatives from the likes of Microsoft, Oracle, Citrix, Sun, Red Hat (the new owner of Qumranet), and Virtual Iron.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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