EXCLUSIVE: VMware employee reveals details on CEO firing, exposes Tucci and Maritz confidential emails
With an astonishing move yesterday the VMware’s board of directors fired the company’s co-founder and CEO Diane Greene.
Greene was immediately replaced with a Microsoft veteran, Paul Maritz, just arrived at EMC after the acquisition of his startup: Pi.
The stock market punished the move with a 25% negative performance.
Additionally, Cisco, which invested $150 million in VMware last year, just retired $78 million.
virtualization.info continues to update a detailed chronology of the events.
So far the company didn’t provide any additional information about the story.
The employees were told to not talk with the press. But the shock and the frustration derived from this unexpected change lead the desire to give a voice to the passionate workforce behind VMware.
virtualization.info received an exclusive document from the a VMware employee, revealing some critical details and sentiments that are animating the company right now.
Additionally, the document exposes two letters sent to all employees from Joe Tucci, EMC CEO, and Paul Maritz, VMware new CEO.
- The employee insight:
No exact details have been given, but it seems like the general idea is that she was fighting to get the company spun off fully. This might have worked for us in a better way as EMC in some ways was a millstone in our progress. I don't know the exact details but it seems like Joe Tucci was not ready to let go yet. BUT a large number of VMware employees are not happy. And it seems that soon people could start leaving in a mass exodus if they do not get straight answers from management. Having an ex-MS employee in a company full of engineers who are pro-FOSS is just a bad idea and sends A LOT of the wrong messages.
The general consensus is that layoffs at the management level will be happening and it will trickle down. Restructuring was a repeated phrase in the company all-hands as well as the departmental meeting I attended. The general impression is that a number of people will be going.
The all hands meeting (referenced in the below Official Announcements) pretty much dodged those questions which raised the mood and anger level quite a bit. Paul used plead the 5th and SOX on 2 occasions during the all-hands Q&A session, which further raised everyone's suspicions that things were going to go south.
The impression is that the culture at the company is going to change as well when new management comes in to take over. The analysts around the web speculating on this are not too far off. People internally seem to agree with the sentiments. Considering that Paul was involved with Windows development, a lot of people are not too impressed internally seeing what Microsoft has produced in terms of software quality over the years he was there. Marketing and market circumstance were their big drivers which they no longer have.
This message basically confirms a couple of points which virtualization.info speculated on in its coverage so far:
- Diane Green was working to sell VMware and finally unchain it from EMC
- Her departure will eventually lead to a mass-exodus, possibly starting from her husband: Mendel Rosenblum, Chief Scientist at VMware
- The Joe Tucci, EMC CEO, email to the company:
As you may have heard by now, the VMware Board has decided to change the leadership of the company, effective this morning.
We are all thankful to Diane for her tireless efforts in building VMware into a world-class software company with a market leadership position. The Board is disappointed that after exploring different opportunities for Diane to continue to play a significant role in the company, we were not able to reach an agreement, and we all wish her success in her future endeavors.
Transitions are never easy, but I ask each of you to embrace this change. Our incoming CEO, Paul Maritz, has the leadership skills and experience to enable VMware to extend its technology and market leading positions. VMware is one of the few companies in technology that has been able to create a new industry. To take advantage of this opportunity and to continue to lead as a new industry evolves into a more mature market will require tremendous leadership and operational experience, especially in today’s tough market conditions. Without a doubt, the competition is increasing and the economy in some of our major markets is uncertain. But equally without a doubt, the market for VMware virtualization is expanding. These factors require the experience our new CEO brings to VMware.
Effective immediately, Paul Maritz is the new CEO of VMware. A leader in the software industry, Paul has decades of experience building one of the greatest franchises in software history, Microsoft Windows. In fact, Paul was instrumental as part of the core executive leadership team in building much of Microsoft’s success.
The Board and I believe Paul is the right CEO at the right time to take VMware to the next level of innovation and success and to achieve the vision for the company that Diane had from the beginning.
Please join me in welcoming Paul to his new role. I know I can count on all of you to give him your complete support through this transition and into VMware’s next era of growth.
- The Paul Maritz, new VMware CEO, email to the company:
First off, I want to thank Diane Greene for her leadership and the legacy she has built at VMware. I am honored by the opportunity to continue to grow the leadership position that VMware has in the industry.
As you may know from Joe Tucci’s email this morning, I have been in the software industry a long time – by now I am sure you all have Googled me so I won’t bore you with my resume, but would like to say that I am excited about the challenges & opportunities that a competitive environment brings.
My passions in life are building great software products and helping build great teams. My operational style will be different than that in a founder-led company. As such, I will call upon our leadership team to be more empowered in decision making, as well as drive down accountability and decision making at all levels in the company. I will be conducting a variety of technical and operational reviews with many of you to make sure I understand and fully appreciate things. I know these are time consuming and require preparation, so I ask for your patience, and promise to keep reviews to the minimum necessary.
Finally, it will take me far longer than I want to get to know all of you. So do not be shy in emailing me or saying hi in the halls as I get to know the VMware family. I don’t believe in formality of position – so please don’t hesitate to reach out if you have concerns or suggestions.
Obviously the two letters fail in addressing the immense number of questions around the Diane Green sack, and less than ever the emails fail in calming down the employees and avoid the massive departure expected by virtualization.info and confirmed by the employee email above.
Expect another remarkable loss today for VMW.
25 Comments
Anonymous
Wednesday, July 09, 2008 1:03:00 PM
For every employee with this opinion I'm sure there are several more who understand that companies need to change and evolve as they grow from a startup to a worldwide market leader.
Jason Boche
Wednesday, July 09, 2008 7:19:00 PM
Yes, well 5+ year employees are the exception, not the rule here. Some part of any exodus may very well be related to support for Diane Greene, but for my part, it's not loyalty but an utter lack of confidence in the competence of the management that let her go in such a disastrous manner. That these rich executives are so indifferent to the financial costs to their employees of them stroking their own egos absolutely infuriates me. Whether or not Diane Greene needed to be replaced, she did not need to be replaced in such an incompetent manner. So any "loyalty exodus" will likely be accompanied by a "lack-of-confidence exodus". I feel no particular loyalty to Diane Greene, but in one fell swoop I lost all confidence in the executive competence that is now driving VMware who-knows-where.
I hope with a new management they will be more customer oriented. The product itself is very very good and has no real competition in the market yet. But, not the best product is winning - the better organization will do.
So you get one "exclusive" interview with one disgruntled joker in need of attention and you call that an amazing story? Come on! Poor journalism folks. Grow up.
Chad Sakac
Thursday, July 10, 2008 1:27:00 AM
I've been with 5 customers jointly with VMware over the last two days now, and it's surely been a strong topic of conversation.
I do think that anyone who isn't a VMware board member (and that includes me) is speculating when they talk about rationale.
I like Diane, I respect both her and Mendel. They created the company (with the other three founders). That is something never to be forgotten.
Is it so irrational to take VMware at their word? They say that this was a decision not taken lightly, that they were exploring the leadership issue for some time, and that they couldn't come to a conclusion that worked for them and for Diane? So then - why the sudden change? Does anyone here have a suggestion on how to "telegraph" a CEO change, or an example of how this has ever been done? I'm sure folks, they couldn't have taken this lightly.
While some may think that's naive - maybe.
But people who speculate wildly (aka spinout, keep ownership model, personality conflicts, etc) are speculating (and I've got to tell you - all that Cisco/Intel stuff that the blogosphere made seem so real - there was nothing to that - but got so out of hand the CEOs of the companies needed to make public statements to get people to chill out).
On the other hand, I think it's naive to see conspiracy theories.
Could it really be as simple as "the board decided they needed a new leader to go from $1.5B - $5B - $10B in annual revenues and grow from 6K employees to 10K employees operating in all three global theatres"?
I think it very well could be. Could Diane have done that? I don't know. I'm not a VMware employee - so I have no internal perspective. But in the end, just like every company, only the Board makes that call.
I can tell you this - the message (and not just words, but actions) within EMC on this is clear - this doesn't change VMware's independence or our arms length (which means "treated same as any other parters - no worse, no better") model.
What is true is that the most important things (at least where I sit) are:
1) how Paul quickly reinforces VMware independence (believe it or not, at EMC we understand how important this is - and are happy to compete on our own merits) and demonstrates actual leadership. I've actually heard good things from my VMware compatriots on his initial dialog with the employees - any VMware folks willing to comment (either way?). Let's give him a chance folks. Virtolic anti MSFT bias, well - it's religious. I know many noble, honorable, and brilliant people there (and just like any company, the normal bell distribution of schmucks and luggage) - and I DO think sweeping generalizations ARE naive. Don't get me wrong, I'm not defending Vista or Windows ME :-) All I'm suggesting is look into what happened under his watch (in terms of Microsoft's market success), and look that the circumstances of his departure from Microsoft. Does it suggest an effective leader who became frustrated with what MSFT was becoming (that happened with several great MSFT leaders around the same time).
2) That VMware continues to innovate and dominate the market they created. There are thousands of bright engineers there, thousands of fantastic field folks. They are the ones (collectively) who write the code, build the product, and bring it to you - not Diane, not Mendel. Would Cisco collapse if John Chambers had to step down? No, of course not (though I'm sure the stock would get hammered). If so, that would be evidence of terrible leadership - every company is more than it's exec ranks - it's the people at every level collectively. Will there be some people who leave - I'm sure (like the guy in the article - dude, drop me a line, let's talk). If it's an exodus - it's a disaster. But looking at some of these comments, and the dialog with my VMware friends over the last 48 hrs, people love the company, the love the product, and the love the opportunity.
If this change helps - that's goodness. If it doesn't - it was a mistake.
But it's really, really too early to make a judgement on that.
I’m working for 3 years for VMware and previous 15 years I spend working for DEC/Compaq/HP, yes I survived 2 takeovers.
Do you know DEC (digital equipment corp.)? For those boys who don’t: in 1992 we brought on market the 64 bit processor. Full 64bit functionality, two operating systems. It is the technology that now, 15 years ago, starts to creep into your datacenters. We had it 15 years ago. And what?
We sold Alpha to Intel, Rdb to Oracle and ourself to Compaq.
Why? DEC was excellent innovative engineering company, like VMware now. But it had bad marketing. So now when I enjoy at VMware the same spirit we had in DEC in early 90s, my objections are always about our marketing.
This is a reason why I find the idea to put in the leading position someone who can use the Microsofts warfare against Microsoft to be good. Come on, we’re at war with Microsoft it is not “co-opetition” as Diana said to “The Economist”. They are a bunch of throat cutting thugs. So we need to be. Mother Theresa was in quite different business.
During last 48 hours I read almost every internet page with words “Diane Greene Paul Martiz”.
My opinion is that the gossips that Diana planned to spin-off VMware from EMC, widespread in the blogosphere, are conspiration theory and platinum bullshit. I will believe in that only when Diana will plunge in Cessna into the EMC headquarters.
More analytical and conform to the common sense are seems to be reports in business newspapers. The explanation, that Diane was a long time pressed by investors to sink prices and compete hard seems to be the hair, which will not be cut by the Occam’s razor (my preferred brand).
Personal differences with Joe Tucci? May be. But they surely have not play the main role in his decision. The article in The Register about it looks like as if it was written by someone who bought a lot of VMware stock last September. It seems to be more plausible that such differences were a reason for Diana to leave instead of taking another position at VMware.
But everything I wrote above are just speculations. I don’t believe we will ever know what is happened.
Diana is bright personality and it is really a big loss for VMware that she is gone.
Now to Paul. Well, positive about him I already said. What are my fears? When a technology company is transferred from its founder to someone put in this position by the board it is not good. Not good because some people think that if they will care of “shareholder value” they don’t need to know what the company makes “Pampers” or Software (and Pampers ARE Software, so where is the difference, baby?).
But looking at the Pauls background I see no resemblances with individuals like Bob Palmer or Carly Fiorina. He seems not to have a passion to collect Porsche cars or to fly in the company owned jets (5 at once). Thus there is a hope.
Now nobody knows what will happen. To speak about Paul’s leadership now is just a speculation, like to speak about reasons for Diane’s resignation.
I've seen DG present on a couple of occassions. I always admired her technical knowledge and vision for technology - although at times i felt she was way over most of the audiences head.
However, i was not convinced by her CEO performance - certainly did not look sharp answering journalists questions at Q end conferences. In fact was downright embarrasing.
I heard the initial all Hands PM presentation - think it was unfair to him as he was barely in the door, to answer questions on where the Company is headed.
I've met many colleagues from many parts of the globe - very commited people with a great passion for the company and the product.
I dont see any retrenchment coming - but i do see Executive group looking carefully at replacing existing staff and seeing where they can add value.
The reaction to sales and share price is way overdone - dont expect sales to be far below forecast - bit of a smokescreen to give PM a low share price to start from.
THIS INFORMATION IS FOR INTERNAL DISTRIBUTION ONLY!
I hope they find the person that leaked the information and terminate them. If they are willing to send out this type of information to the media, what else are the giving out and more importantly to WHOM???
Quit your whining, this is not a perfect world.
Either accept the changes and work hard as the professionals you are supposed to be, or find employment elsewhere.
You're not in the Army, you can leave.
Oh and since when has email been confiential?
Any time you push that send button all bets are off. How many times are people getting in trouble for the content of "confidential" email?
If you don't want it in the news don't write it.
The stock price fell mostly because people don't understand VMware products or how to gauge Microsoft's "competition". They just hear that MS released ver 1.0 and that it must mean the end for VMware, regardless that it isn't even close to competeing on the same level. The fact that it coincided with the CEO change at VMware just reinforced their layman's notion that VMware must be in trouble. It's all nonsense.
We at VMware will continue to work hard and put out a great product, and we have never been complacent about competition coming down the road. Quite the opposite. The word has been out from management for quite some time that we need to get ready for Microsoft, and we have been.
Everybody is different, and this is one person's opinion. It doesn't represent VMware as a whole by any stretch, and is certainly no exclusive. Virtualization.info is speculating, because that's all they can do. Like any media out there, it's just a bid to sensationalize.
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