Good Management or Bad Management? EMC's Firing of VMware's CEO

Ashlee Vance has a great story in this morning's NY Times, dealing with Joe Tucci's firing of Diane Greene, the CEO of the virtualization pioneer VMware (publicly-traded, but majority-owned by EMC.)

Here's the opening:

In the summer of 2007, Diane Greene was lauded as a business hero for leading VMware, a maker of business software, to the hottest stock debut since Google. But in the ensuing year, despite her popularity with employees and on Wall Street, her relationship with her directors, and especially VMware’s chairman, Joseph M. Tucci, grew increasingly chilly.

On July 7, she found out just how cold it had become. After Ms. Greene made a special presentation to VMware’s board, Mr. 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, Ms. Greene’s husband and the co-founder of VMware, into the room, Mr. Tucci told Ms. Greene she was fired, effective immediately. And he said the board wanted Mr. Rosenblum, VMware’s chief scientist, to take her seat on the board. Mr. Rosenblum declined the offer.

When Ms. Greene’s firing was announced to investors the next morning, VMware’s shares plunged 24 percent, and the high-flying company was thrown into a tailspin from which it has yet to recover.

Check out this press release noting that VMware (before Greene's firing) had been named one of the Top 100 IT companies of 2008. EMC was also on the list, but much lower than VMware.

You could view this situation in one of three ways: either Greene was better-suited to leading an independent, fast-growth tech company, and wasn't working well with her corporate overlords...or EMC is not great at managing entrepreneurial folks who may sometimes have strategic disagreements (or personality clashes) with top leadership...or a little bit of both.

Either way, EMC (and Paul Maritz, the EMC exec who took over Greene's post) has a lot to do to prove that Greene's firing isn't a major setback for VMware. VMware's stock has been sagging since the firing, and its chief scientist, Mendel Rosenblum (yes, Greene's hubby), just quit to go back to academia. The head of product also left recently, too.

VMware Delivers 2007's Best First-Day IPO Performance

VMware, based in Palo Alto but owned by EMC of Hopkinton, went public today. The IPO price was $29, and the stock closed at $51, according to The Wall Street Journal. From the piece:

"Considering their light competition and extreme growth continuing, this may still be a reasonable valuation," said Scott Sweet, managing director of IPOBoutique.com, an IPO-research service in Tampa, Fla., of the company's first-day's gains. Mr. Sweet received shares in the offering for his personal account, but sold them in early trading Tuesday.

Rachel Chalmers, an analyst at technology-research firm the 451 Group, says VMware's virtualization software can reduce office space dedicated to hardware, cut down on the amount of air-conditioning needed to keep servers cool and run upgrades and do maintenance without having to shut down machines. VMware began shipping a new product last year that targets desktop computers, which she says is the next market frontier for virtualization. The company estimates that only 1% of the world's business desktops are currently using virtualization software.

Since its founding in 1998, "VMware has grown faster than any other software company we have come across," says Ms. Chalmers, whose husband is employed by another virtualization-software firm, XenSource.

The Journal also offers a primer on what VMware does, calling it "an unsexy technology with a sexy stock price."