VMware loses its CEO – Updated

With a very short news just published by several press agencies VMware announces that its popular (and honestly beloved) CEO, Diane Greene, has been replaced by Paul Maritz.

Paul Maritz is the President and General Manager of Cloud Computing division at EMC, with a 14 years old career in Microsoft where he was Vice President of the Platforms Strategy and Developer Group.

It’s clear that VMware is working to enter the cloud computing space, but replacing a highly successful CEO like Diane Greene doesn’t seem the best way to do that.
Additionally, it’s odd that Maritz’s wikipedia entry is already updated with the new position while the official announcement didn’t provide any detail about the reasons behind such a sudden replacement or which kind of involvement Greene will have in the company in future.

It’s worth to highlight that the VMware’s Chief Scientist, Mendel Rosenblum, is also her husband.
This replacement, if imposed by the parent company EMC, may have a huge domino effect on the whole VMware management team.

Some sources are reporting that Diane Greene was fired by the board and immediately replaced.
virtualization.info is unable to confirm this news, but we can speculate on the reason: the attempt to unchain VMware from EMC control, selling to another, more interesting partner like Intel.

It’s well know in fact that Diane Greene and Joe Tucci, EMC’s CEO, had a hard time working together since the early beginning.

Second update: Multiple news magazine are confirming that Diane Greene didn’t resign but was replaced.

The key question is not just why the board fired the VMware CEO, but most of all why it replaced the CEO with somebody totally unrelated with the company.

In normal conditions, the safest thing to do would be appointing the next charismatic person from the original executive team that led VMware before the EMC acquisition in 2003.
This would have avoided the panic and confusion among the employees, which are already reacting in a negative way. But EMC CEO preferred to pick a just arrived executive (Maritz arrived in EMC just in February 2008, after the acquisition of its company Pi) with a lengthy career at the VMware’s worst enemy.

A possible explanation is that Tucci couldn’t trust anybody in the VMware team and was obliged to appoints somebody totally outside the Greene’s influence.
And this makes sense only if the whole VMware’s management team was cooperating in something that implied the CEO’s removal.

Now it’s critical to understand what Mendel Rosenblum and the others will do. On their moves depend the confidence that VMware can maintain the market leadership against Microsoft.


Third update: At the end of the day the VMW performance suffered a –24.44%, translating in billion of dollars in losses:


Almost every news magazine reported that the Greene removal depended on the negative financial performance expected for the Q2 2008, lower than the forecast.
This is simply impossible: some slightly lower results would never be enough to justify the departure of a successful and popular CEO like Diane Greene.

EMC will have to provide extensive and credible explanations on what happened today to recover the investors’ trust and avoid an even lower result tomorrow.

Fourth update: The Diane Greene profile as VMware CEO has been already replaced.
Meanwhile ValleyWag published a small insight about Paul Maritz.

Fifth update: BusinessWeek reveals that the Board of Directors offered to Diane another position in the company and she refused. Obviously the magazine can’t tell what conditions she’d agree on.

Sixth update: NetworkWorld reveals some critical details about what happened at the Board level.
Two members of eight, the only two that are not employed at EMC, were against the decision to remove Diane Greene: Dennis Powell, representing Cisco, and Reene James, representing Intel.

Cisco and Intel are exactly the two key firms that were rumored to be interested in the VMware take over during the last months, even if just few days ago Cisco CEO officially dismissed any interest in buying the company.

Cisco is not happy with the decision to remove Greene and as direct result just retired $78 million from its $150 million investment made before the last year VMware’s IPO.

The domino effect has just started.

Seventh update: virtualization.info published an exclusive document submitted by a VMware employee, revealing some critical details and exposing the confidential emails sent to the company by Joe Tucci and Paul Maritz.

Eighth update: Two days after the announcement (July 10) VMware filed a form 8-K to formalize the replacement of Diane Greene.
The document clarifies that the departure would be treated as a Termination without Cause.

Nineth update: In the sixth update above we reported that Cisco retired $78 million from its investment in VMware, trusting NetworkWorld source.
This is incorrect. Cisco lost that amount because of the stock performance but didn’t operate any modification on the amount of shares it owns.