(Adds comments from Tucci interview, analyst react)
By Jim Finkle
BOSTON, July 8 Business software maker VMware
Inc (VMW.N) issued a revenue warning that sent shares tumbling
30 percent to a historical low, and replaced its CEO, one of
Silicon Valley's highest-ranking women executives.
VMware, which is facing increased competition from
Microsoft Corp (MSFT.O) in the market for virtualization
software, said on Tuesday its board named former Microsoft
executive Paul Maritz, 53, to replace Diane Greene, also 53, as
chief executive with immediate effect.
Greene, who could not be reached for comment, co-founded
VMware a decade ago with her husband, Mendel Rosenblum, a
Stanford University computer scientist.
Board Chairman Joe Tucci, who is CEO of EMC Corp EMC.N,
which owns 86 percent of VMware, told Reuters VMware's Greene
was replaced because the board wanted a leader with more
operational experience to take the software company to the next
stage of growth.
Tucci said he had asked Greene to stay with VMware, but she
declined to take on another post at the company.
"This economy is tough. We don't see it improving soon,"
Tucci said in a phone interview.
The poor U.S. economy was a factor behind VMware's warning
on Tuesday that its 2008 revenue would be "modestly below" its
previous forecast of 50 percent growth over 2007, he said.
When asked to elaborate on that warning, Tucci said,
"modest is another way to say slight." But he declined to give
more details before the company's second-quarter results are
released on July 22.
Microsoft charges $28 for its Hyper-V virtualization
software, while VMware says it charges $495 for the most
comparable product, known as ESX.
VMware's server virtualization software helps one computer
do the work of multiple machines, allowing companies to save
money on equipment, electricity, maintenance and other costs.
Tucci said sales were taking longer to close, but that
VMware had not lost any deals.
Pacific Growth Equities analyst Kaushik Roy said he
interpreted VMware's language to mean that it expects to see
revenue rise 40 to 50 percent this year.
VMware shares fell to an all-time low of $36.55 on Tuesday
morning before recovering to $38.82, down 54 percent for the 11
months since it began trading. EMC shares fell 10 percent to
$13.56 in midday trade.
VMware went public in August 2007 in what was the hottest
technology initial public offering since Google Inc's IPO in
VMware shares debuted on the New York Stock Exchange at $52
in August 2007, compared with their IPO price of $29. They
reached a record high of $125.25 in October 2007.
Global Equities Research analyst Trip Chowdhry said Greene
failed to anticipate the competition.
"You need a person who has a pulse on the business, a
person who is able to understand the strategic implications of
competitive pressures," he said.
Maritz worked at Microsoft for 14 years. He managed the
development and marketing of products including Windows 95. He
left Microsoft in 2000 and founded Pi Corp, which was acquired
by EMC. He most recently ran EMC's cloud computing division.
(Additional reporting by Eric Auchard; editing by John
Wallace, Leslie Gevirtz)