Jim Finkle in Boston | July 09, 2008
BUSINESS software maker VMware has warned that 2008 revenue growth will fall short of expectations and said it has replaced its chief executive, sending its shares tumbling 30 percent.
VMware's board named former Microsoft executive Paul Maritz to replace Diane Greene as CEO. It gave no reasons for the move. The company was founded a decade ago by Ms Greene and her husband, Mendel Rosenblum, a computer science professor at Stanford University.
VMware said it expects revenue for 2008 to be "modestly below" its previous forecast for 50 percent growth over 2007. It did not elaborate.
Jefferies and Co analyst Katherine Egbert said she 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 virtualisation 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.
Server virtualisation software lets one machine perform the work of multiple servers, allowing companies to save money on equipment, electricity, maintenance and other costs.
Ms Egbert said demand for such money-saving products remains strong, even in the current weak economy.
"You have to believe this (change in revenue forecast) is due more to new competition than to macroeconomic issues," she said.
VMware, 86 percent-owned by storage equipment maker EMC, is scheduled to report second-quarter results on July 22.
Its shares fell to an all-time low of $US36.55 ($38.43) earlier in the session before recovering a little to $US38.77, still down 27 percent. EMC shares fell 12 percent to $US13.33.
The shares debuted on the New York Stock Exchange at $US52 in August 2007, compared with their IPO price of $US29. They reached a record high of $US125.25 in October 2007.
Mr Maritz worked at Microsoft for 14 years. He managed the development and marketing of products including Windows 95. He left Microsoft in 2000 and several years later founded Pi, which was acquired by EMC. He most recently ran EMC's Cloud Division.
Reuters