Diane Greene ousted from VMWare by EMC

Diane Greene, co-founder of VMWare, was released as President and CEO by the company board on July 8, 2008. However, the implication is that parent company and majority share holder EMC Corp. considers Ms. Greene unable to manage such an operation. In fact, some sources and online posts claim that Ms. Greene may be at fault for lower sales. There is also the issue that EMC currently faces claims of sexual discrimination. 

Ms. Greene has endorsed the versatility of VMWare since inception and maintained that the product should be a stand alone solution and not tied to any particular storage devices (EMC for example). However, with EMC’s acquisition and continued insistence of majority share holder status, one is forced to speculate that this action serves to ensure the marketing of EMC products. Ms. Greene’s approach was to prohibit the EMC sales representatives from participating in sales appointments conducted by the VMWare sales representatives. However, Net Easy has participated in numerous sessions presented by VMWare and has yet to attend any VMWare demonstration that did not have an EMC representative present. In addition, Net Easy has yet to attend a VMWare demonstration that included other storage vendors like Equallogic (now owned by Dell).

Net Easy speculates that VMWare’s sales decline is a result of several factors, such as a struggling economy, the saturation of larger markets that can afford such product price points, and new competing products entering the market, e.g., Microsoft’s Hyper V virtualization and Citrix (CTXS). Additionally, Net Easy believes that the VMWare stock decline is really part of general global market corrections, as well as a correction in value since when the VMWare IPO occurred the value was inflated due to higher profit speculation rather than being based on the true value of the company. Effectively it is a correction in value to a product that now faces market competition. 

The board has stated that it has replaced Diane Greene with Paul Maritz, who served at Microsoft for years. Speculation of his track record combined with the enhancements VMWare poses to EMC stock value indicate that EMC will not be inclined to spin VMWare off as a separate entity unless forced to do so by other share holders. In fact, EMC stock rose with the acquisition of VMWare and continues to rise this morning with rumors of a spin-off. However, the VMWare shares are at an all time low. 

Net Easy believes VMWare’s success is tied to continued neutrality to connect to various storage devices and to continued development in virtualization technology. To ensure a large sales scenario, better market pricing for small entities would increase the consumer base volume and thus increase revenue.

EMC claims it will not interfere with VMWare’s direction or management. In fact, it was only able to acquire VMWare by the high acquisition offer that appealed to original employee owners of VMWare. Ms. Greene desired not selling to EMC, but the high offer’s appeal to other owner holders forced Ms. Greene and Co-Founder Mendel Rosenblum to sell. Now Rosenblum serves as advisor to VMWare, and Ms. Greene has declined another lesser position inside the company. 

So, the world waits to see the next play by the board and EMC. However, Net Easy hopes that VMWare will be spun off from EMC and will address price points for smaller clients. EMC should be forced to compete against IBM, HP, etc. on its own merits.