VMware's CEO Swap

Few could have foreseen the shocking departure of VMware CEO Diane Greene today, less than a year after the virtualization specialist was grabbing the headlines for its whopping $1.7 billion IPO.

Last summer VMware was that rarest of beasts; a niche technology company enjoying rapid growth at a time when more established vendors were becoming increasingly anxious about the vagaries of the economy.

Even now, almost 12 months after VMwares August IPO, there are only hints as to why EMC chief Joe Tucci and the VMware board decided to swap out Greene with EMC exec Paul Maritz.

Despite spinning off part of VMware in last year’s IPO, EMC still maintains an 86 percent stake in the company, and shows no signs of relinquishing any more control.

Greene’s contract was up this month, according to an article in Fortune, and there has been speculation that Greene and Tucci may have differed over how much independence to give VMware. The virtualization giant, for example, has strong links with IBM, which is a key competitor of EMC.VMware also lowered its guidance today, suggesting that the vendor is preparing itself to deal with a much tougher spending climate and heightened competition.

"Factors to consider include long-standing tensions between VMware and EMC,” wrote Todd Weller, an analyst at Stifel Nicolaus & Co., in a note released earlier today. “[It is] not clear what drove abrupt CEO change, but [we] believe there is likely a lot more at play than modestly reduced outlook.”

So far, no official reason has been offered for Greene’s departure, although it is clear that EMC has its own plans for the company.

”Many companies reach a point where a different kind of leader is required for different stages,” wrote Weller, explaining that Greene is more of an entrepreneurial CEO than a seasoned software exec. “Likely related is the fact that the new CEO has significant experience working at Microsoft, which not coincidentally, is VMware’s biggest competitive threat.”

This will have played a major part in VMware’s management reshuffle. Whereas the vendor had the virtualization market largely to itself just a few years ago, the same cannot be said now. Rival Citrix, for example, has been aggressively touting the technology from its XenSource acquisition as a low-cost alternative to VMware, and Microsoft has also entered the fray with its Hyper-V offering.The decision to replace Greene with Maritz, the former CEO of cloud storage specialist Pi, could also be a key indicator of VMware’s future. Since February, Maritz has served as president of EMC’s cloud storage division, suggesting that EMC plans to tie VMware closer to its slowly unfolding cloud strategy.

At this stage, the dust has still not settled on Greene’s shock departure, so it could be months before we really see what the new VMware looks like.

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