VMware shares plunge on CEO change, slowing growth

Former Microsoft Corp. executive Paul Maritz took over as VMware's new leader. In the past few months, Maritz had been running a division of VMware's controlling shareholder, data storage specialist EMC Corp.

VMware didn't provide any explanation for the sudden change in command. The Palo Alto-based company didn't return phone calls.

Greene, who was eligible for a $750,000 bonus to supplement her $750,000 salary, had been working under a one-year contract scheduled to expire at the end of this month. She also has had an uneasy working relationship with Hopkinton, Mass.-based EMC and its CEO, Joe Tucci, who chairs VMware's board.

Given those tensions, Greene's departure was interpreted as a sign that VMware isn't faring as well as EMC had hoped in the face of increasing competition and a slowing economy. VMware fed that perception by warning its revenue growth this year will fall shy of the 50 percent increase that management had been targeting.

"This was out of the blue, so people are speculating the second-quarter results weren't up to snuff and this (change) was something that Tucci probably instigated," said Caris & Co. analyst Shebly Seyrafi. VMware is scheduled to release its second-quarter numbers on July 22.

In a prepared statement, Tucci thanked Greene and praised her for developing "a company that is changing the way that people think about computing."

VMware dominates the market for so-called "virtualization" software--products that help corporate data centers lower their expenses on power and equipment by enabling a single computer to function like multiple machines. The "VM" in the company's name stands for "virtual machine."

Greene, 53, and her husband, fellow VMware co-founder Mendel Rosenblum, are widely credited for turning virtualization into a hot concept.

Seyrafi said investors are now are fretting about how VMware will fare without Greene, a soft-spoken sailing aficionado who had been the only CEO in the company's 10-year history.