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Greene is Out; What's Next?

What is up with this? In case you’ve been hiding under a rock—or, like me, have been on the road all day with no Internet access—VMware issued a press release today announcing the removal of Diane Greene as President and CEO of VMware, to be replaced by a former Microsoft executive, Paul Maritz. Where in the world did this come from?

I think that everyone knew that VMware’s meteoric revenues simply would not and could not continue as they had. Too many competitors, including Microsoft, were nipping at their heels. I’ve been saying for months that VMware needed to be diligent and continue to innovate, to keep the focus off the virtualization engine itself and keep the focus on the tangible business benefits of using virtualization. This means that VMware needs to continue to deliver game-changing technologies like live migration (VMotion), DRS, VMware HA, and Storage VMotion. As soon as customers see that other vendors are delivering “good enough” virtualization engines, VMware will begin to lose its luster. Is that what happened here, and Greene became the “fall guy”?

This site in the UK indicated that VMware had issued a fiscal 2008 shortfall, but I’ve been unable to locate that information, aside from this WSJ article that briefly mentions VMware lowering their revenue forecast. The same article also links to this Fortune article that indicates that Greene’s contract ended this month (I didn’t see that information in the linked article). Perhaps, as that article suggests it’s simply a failure to renew a contract. Whatever the reason, it’s a new era at VMware starting today.

We may never know the real reasons or motivations behind the move. The real question, in my mind, is what’s next? The relationship between EMC and VMware has always been an “arms length” relationship. Does the appointment of Paul Maritz, a former Microsoft executive and previously the director of EMC’s cloud computing business unit, signal a change in that relationship? Despite the rumors of EMC spinning out VMware, or the rumors of Intel buying VMware, there are others that think this signals the start of a new relationship:

But he agreed that a spin-off of the remaining VMware shares now looks less likely, since EMC has “essentially inserted one of its own as CEO.”

In addition, rumors from the field of EMC sales reps more closely aligning themselves with their VMware counterparts, and in some cases even inviting themselves onto VMware sales calls in an effort to pitch storage wares seem to indicate a new level of interaction (and perhaps integration?) between VMware and EMC. This move, led by Joe Tucci, also seems to indicate that the “arms length” relationship between VMware and EMC is now over. Is VMware’s autonomy now over? To borrow a line typically reserved for Microsoft, resistance is futile.

UPDATE: As expected, coverage of this is everywhere. Of the various articles covering this, I enjoyed this one the most. And I really have to agree—why in the world would you rattle the entire company by firing its CEO, possibly placing yourself in the position of losing its Chief Scientist (Mendel Rosenblum, who is Diane’s husband), right at the worst possible time? Microsoft is finally ready to compete with VMware. Why now? From where I’m sitting as an ordinary guy who knows absolutely nothing about running multibillion dollar companies, I have to say I think this was a boneheaded move.

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