Management, Strategy Conflicts May Be Behind Greene Exit

Diane Greene's precipitous and unexpected departure from VMware yesterday may have resulted from an ongoing rift between Greene and executives at parent company EMC, according to analysts. Meanwhile, Wall Street showed its displeasure with the news, hammering the stock down 25 percent the day of the announcement.

While theories are circulating as to what led up to the split, Greene's determination to maintain the autonomy of VMware is well known. She has stated publicly her desire to disengage from EMC at some point in the future.

Greene reportedly differed with Joe Tucci, EMC's chairman and CEO over that issue as well as fundamental aspects of how the company should be run and how deals should be structured. According to Rachel Chalmers, an analyst with the 451 Group "the tension has existed for a least a year, maybe more, with EMC management."

"EMC wasn't even allowed to sell VMware products tightly integrated with EMC storage," Chalmers pointed out.

Also in the mix were issues relating to the company's financial results as well as the handling of strategic planning. According to analysts, one point of contention was whether the company has been properly positioned to meet the demands of the next phase of competition involving companies such as Microsoft and Citrix, as well as large systems vendors such as HP, IBM, Oracle and others.

Frank Gillette, a vice president with Forrester Research, said the company was in good shape to stay on track until 2010 regardless of competitive activity, but noted that while "VMware executed very well on the paradigm it built," it may now be "lacking the marketing, strategy and leadership to jump up to the next level."

In terms of financial performance, investor concern was heightened last year when fourth quarter results failed to meet expectations. Although the numbers got back on track in the first quarter of this year, the company has lowered forecasts for the current quarter, saying in a statement, "We expect revenues for the full year of 2008 will be modestly below the previous guidance of 50 percent growth over 2007."

In its announcement of Greene's departure, EMC did not comment on specific reasons. According to a report in the New York Times today, EMC asked Greene to leave after she rejected an offer from the the board to either resign or accept a different position at VMware, the company she co-founded with her husband and several others in 1999.

About the Author

Tom Valovic is a freelance technology writer.