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Diane Greene

Stand By Your Woman: Mendel Rosenblum Leaves VMware Too

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Reporting on the recent removal of Diane Greene as president, CEO and board member of VMware, we wrote:

“We’re wondering how the VMware troops will react on the news, and what will happen with Mendel Rosenblum, Chief Scientist at VMware and Greene’s husband.”

Now IHT / The New York Times has received confirmation that Rosenblum, co-founder and top executive at the company as well as husband to Greene, has resigned from his position (hat tip to Tarry). He announced his resignation and return to Stanford as a full-time professor in a companywide message on Monday night.

The NY Times also offers some insight about the removal of Greene:

On July 7, she found out just how cold it had become. After Greene made a special presentation to VMware’s board, Tucci, who heads VMware’s parent company, EMC, pulled her aside, according to people familiar with the events, who asked for anonymity because they were not authorized to discuss internal company decisions.

Inviting Mendel Rosenblum, Greene’s husband and the co-founder of VMware, into the room, Tucci told Greene she was fired, effective immediately. And he said the board wanted Rosenblum, VMware’s chief scientist, to take her seat on the board. Rosenblum declined the offer.

The news comes after the surprising move of Richard Sarwal, former executive VP of research and development at VMware, who returned to Oracle after a brief stint at the company. Another executive to jump ship is Paul Chan, Vice President of Product Development at VMware until recently.

Who’s next?

We’ll update the post should new information come to light.

Diane Greene’s Potential Payout Nearly $50 Million USD

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Unless you’ve been living under a rock, you know Diane Greene was recently abruptly ousted from the top spot at the very company she co-founded, VMware.

Greene, 52, had been CEO of the company since she helped start it in 1998 along with 4 others, including husband and current Chief Scientist Mendel Rosenblum. Her salary, according to a July 2007 employment agreement, was $750,000. Her salary in 2007 was $583,333 and her total compensation for the year was $8.6 million.

Another interesting caveat: according to VMware’s proxy statement, Greene could be paid a bonus of $491,678 and her stock options may vest early, which could increase the value of her potential payout to $47.5 million or even more.

[Source: SF Business Times]

VMware

VMware (VMW): Second-Quarter 2008 Results (Updated)

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VMware reported its second-quarter 2008 results today, with an earnings conference call which was followed closely after the abrupt removal of Diane Greene two weeks ago (see our ‘the week after‘ post too for reference). Don’t feel too bad for her, we’ve just reported on her potential payout, which could be well over $50 million USD.

These are the results that were just announced, in bullet points:

  • Net income of $52.4 million, or 13 cents a share, compared with $34.2 million, or 10 cents a share, a year earlier.
  • Revenues for the second quarter were $456 million, an increase of 54% from the second quarter of 2007. Update: this is below Wall Street analysts expectations and estimates, who projected $458,6 to 460 million in revenue – (which the company also projected in April but revised later on). Shares going down.
  • GAAP operating income for the second quarter was $61 million, compared to $47 million for the same period last year.
  • Non-GAAP operating income was $112 million, an increase of 52% from the second quarter of 2007.
  • GAAP net income for the quarter was $52 million, or $0.13 per diluted share, compared to $34 million, or $0.10 per diluted share, for the second quarter of 2007.
  • Non-GAAP net income for the quarter was $92 million, or $0.23 per diluted share, compared to $52 million, or $0.16 per diluted share, for the second quarter of 2007.
  • Cash exceeded $1.5 billion and deferred revenue was $721 million as of June 30, 2008.
Second quarter U.S. revenues grew 43% to $240 million from the second quarter of 2007. International revenues grew 68% to $216 million from the second quarter of 2007 driven by strength in Europe and Australia.
Software license revenue grew 39% to $284 million from second quarter of 2007. Service revenues, which include support, subscription and professional services, were $172 million, an increase of 85% from the second quarter of 2007.
As for the financial outlook:
  • 2008 revenues are targeted to grow approximately 42% to 45% compared to 2007. Update: this is rather modest.
  • Third quarter 2008 revenues are targeted to be within a range of approximately $462 to $468 million. Update: Analysts were projecting revenue of $497.3 million
  • Third quarter GAAP operating margin is targeted to be between 11% and 13%. This guidance includes stock-based compensation, employer payroll tax on employee stock transactions, amortization of intangible assets and capitalized software development costs which are targeted at 9% of projected revenue.

VMware is hosted a conference call today reviewing its results and discussing its financial outlook. The call was scheduled to begin at 2:00 p.m. PT/ 5:00 p.m. ET.

A noteworthy statement from Paul Maritz in the call was also the fact that VMware intends to make VMware ESXi completely free. The free version, officially called ESXi 3.5, will be available to download starting July 28. Maritz believes this approach to virtualization will help bring more customers into the VMware fold and make virtualization technology ubiquitous.

VMware

Diane Greene’s Departure from VMware: The Week After

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It’s been exactly a week since word got out that VMware co-founder and acting CEO Diane Greene was leaving the company to be replaced with former Microsoft executive Paul Maritz, who prior to the move headed EMC’s cloud computing division. Evidently, this event spurred tons of reactions worldwide, with lots of speculation, analysis and predictions for VMware’s future. Now that the dust has settled a little, here’s what we gathered from the past week:

Diane Greene most certainly did not get ousted only because of the disappointing financial results and prospects. While this may have played a role in the process, it’s a fact that Greene did not see eye to eye with EMC’s CEO and VMware chairman Joe Tucci in large part because of her determination to let the company sail a largely independent path. Rumor has it that she was pushing hard for the company to be spun off, and only a few hours before her departure was making headlines in the press and on blogs, EMC shares went up on rumors of a full spin-out of VMware to shareholders with minimal tax implications starting in early 2009.

Contrary to some speculation, Greene wasn’t against selling to EMC, but she was not always happy with the way its new owner tried to steer VMware’s course. It’s very likely that ousting Greene had been on the table for several months, and that it wasn’t prompted by a single event or market dynamics. The subsequent FORM 8-k eventually stated ‘Termination without cause’.

Greene gained a lot of respect both within the company (especially from the early employees and management team) and outside, helping VMware become the fastest growing software company this side of Google, with a killer IPO as a result, an impressive market share for its core business, and loads of technological innovation which seemed to set its competitors back with every new product release. But the question remains: did Diane Greene really have what it takes to stay at the helm with competitors like Microsoft and Citrix slowly switching to full gear, while small startups started to eat away at the company’s market share with small, but nasty bites?

We believe the switch may not be such a bad thing for the company after all. Maritz is a smart, ruthless manager and he knows how to play the game. He also carries a lot of insider knowledge from his days at Microsoft (and EMC), and we believe he might be able to turn the company’s slipping revenue streams around and grow the company into a position where its competitors can’t simply crush it under their weight. Unlike some, we’re bullish on VMware’s prospects, particularly on the enterprise market. If it will play a large role in making virtualization a hot topic for SMB’s as well, remains to be seen.

Meanwhile, its stock is trading at 40.50, recovering slowly after taking a big hit following the news of Greene leaving and a slightly lower revenue forecast.

On a sidenote, we consider it a shame that with Greene’s departure, the number of female CEO’s at Silicon Valley’s 150 biggest corporations is now down to zero. However, it was already a shame there was only one before she left.

Also, we’re still wondering if Mendel Rosenblum, chief scientist at VMware, one of its 5 co-founders and husband to Diane Greene, will remain in his position at the company for much longer.

Don’t hesitate to post your thought on the above in the comments!

Exclusive Video: VMware In A Nutshell, By Product Marketing Manager John Gilmartin

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So what’s VMware all about now on a technology level, now that their stock went tumbling and their CEO has been replaced? John Gilmartin, Group Manager, Product Marketing at VMware answered our questions on virtualization in general and their strategy and product portfolio in particular.

After defining virtualization and virtual machines, John dives deeper into what drives prospective virtualization customers (infrastructure consolidation, high availability, business continuity, disaster recovery?). He also shares more on their recently announced VMsafe initiative, which allows trusted partners to ‘peak’ into a Virtual Machine and identify threats from the outside of the operating systems and the applications they try to protect.

John underlines that VMware is offering features far beyond the basic data center consolidation needs; such as life cycle management, Virtual Desktop Infrastructure (VDI), automated provisioning, fail over, disaster recovery and optimize the management tasks for a virtual infrastructure.

All this is part of VMware’s from-desktop-to-datacenter portfolio and makes VMware feel confident and well positioned to compete with Hyper-V from Microsoft.

Breaking: Diane Greene Leaves VMware, Paul Maritz To Become CEO and President

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VMware co-founder Diane Greene (see BusinessWeek profile) has been ousted as president and chief executive of the company and will be replaced by former Microsoft executive Paul Maritz (we reported on him joining EMC’s cloud computing division earlier this year), effective immediately. The company also said that while it “is not updating guidance for the second quarter, we expect revenues for the full year of 2008 will be modestly below the previous guidance of 50% growth over 2007.” The mean estimate of analysts surveyed by Thomson Financial was for 51% growth to $2 billion.

Shares of the virtualization software maker went tumbling in recent trading. The stock was recently down 24.3% to $40.26 a share. Shares have fallen by two-thirds the past eight months. The stock went public at $29 and rocketed in its first two months of trading to as high as $125 a share.

On Fortune.com’s Go West blog, Adam Lashinsky writes that VMware “was so loved by investors that it singlehandedly drove the valuation of EMC, whose best move this decade may have been buying VMware before it had the opportunity to go public the first time.”

Things change. VMware stock is falling big time since the news got out.

It’s highly likely that EMC has replaced Diane Greene because of the poor revenue outlook. Also worth noting is that we reported a rumor earlier today about VMware possibly being fully spun out of EMC (which now becomes highly unlikely, considering Paul Maritz’ track record).

We’ll post more details as soon as they’re available. We’re wondering how the VMware troops will react on the news, and what will happen with Mendel Rosenblum, Chief Scientist at VMware and Greene’s husband.

This is the official take from the company’s chairman, Joe Tucci:

“As one of the founders and the leader of VMware, Diane guided the creation and development of a company that is changing the way that people think about computing,” Tucci said in the statement. “The Board thanks her for her considerable contributions to VMware and wishes her every success in the future.”

Reuters has a comment from Jefferies and Co analyst Katherine Egbert, who was disappointed the company did not hold a conference call to explain why it was cutting its revenue forecast.

“She said she suspects VMware is concerned that sales of its server virtualization software will get squeezed by new competition from Microsoft, which late last month started selling a rival product. Microsoft introduced that product, which costs far less than VMware’s offering, six weeks ahead of its previously announced launch date.”

Update: VMwareVideos reminded us of this video of Diane Greene talking about VMworld.

They also found this one featuring the new CEO and President, Paul Maritz, an ex-Microsoft Corp executive, reflecting on what it’s like to have Bill Gates review your stuff.

[Source: MarketWatch]