VMware Beefs Up Its Bench

CEO Diane Greene is assembling a crack team of executives to help the virtualization-software maker tackle new economic and competitive pressures

by Aaron Ricadela

VMware's longtime Chief Executive, Diane Greene, has a lengthy history of doing the unexpected.

After the old-line Massachusetts computer firm EMC (EMC) bought her Silicon Valley startup in 2004, Greene fought hard to maintain the company's autonomy. She then pulled off 2007's most successful initial public offering when EMC spun out 10% of the shares. She spurned a buyout offer from Microsoft (MSFT) in 2002 and has since positioned VMware (VMW) as a formidable rival to its former suitor. Last year, VMware moved into an airy, eco-friendly headquarters in the wooded hills near Stanford University after disagreeing with majority owner EMC over the builders and the cost.

In each case, VMware co-founder Greene bucked the conventional wisdom. Now, with VMware's once high-flying stock grounded and competition rising, she may need to counter it again, proving to Wall Street that she's got the mettle to lead VMware through its next chapter.

Fresh Blood

For starters, Greene and VMware's management are bringing in seasoned executives from outside the company to help guide VMware through a new, potentially tougher phase. A looming recession threatens what until now have been torrid sales of VMware's virtualization software, which helps companies cut costs by grouping the work of multiple computer servers onto a single machine, and Microsoft, Oracle (ORCL), and others aim for a piece of VMware's impressive market share.

In December, VMware poached Richard Sarwal from Oracle, where he'd spent more than 18 years, to become its executive vice-president for research and development, overseeing all of VMware's R&D. In January, VMware lured Kate Hutchison from competitor Citrix Systems (CTRX) to become its chief marketing officer, to better explain VMware's esoteric technology to the marketplace. The company is also close to securing another senior executive hire, according to one person with knowledge of VMware's plans. In addition, VMware is said to be looking for executives in corporate development and field sales.

Greene points to a cadre of founders and longtime executives as a company strength, but says VMware's success is also tied to luring high-profile outsiders. "As we grow, we get increased interest from really talented people from outside," she says. "We're bringing in new talent to complement the talent that's already here." In the case of Hutchison, VMware would seem to get the best of both worlds—Hutchison helped Greene publicly launch VMware in 1999 while working as a consultant. "She's been part of the company from the beginning, which is an added bonus," says Greene.

New Skills Needed

VMware is stocking its bench at a vital time. Its shares, which closed Mar. 12 at 51.27, have lost 38% of their value since a late-January rout of the stock, and are 59% lower than the peak of 124.83 on Oct. 31. Its August, 2007, IPO raised $1.1 billion and made VMware one of the world's most valuable software companies. But VMware shares lost a third of their value on Jan. 29 alone (BusinessWeek.com, 1/29/08) after the company posted disappointing fourth-quarter sales and issued a weaker than expected revenue forecast for 2008.

"They're in a fragile state of growth," says Derrek Milan, an executive recruiter at Korn/Ferry International (KFY), which counts VMware as a client. VMware is in the process of installing a handful of "top lieutenants" to help Greene as the company expands sales by an expected 50%, to $2 billion in 2008, according to Milan. The company is looking for executives who have managed during periods of rapid growth at tech companies, who understand sophisticated technology, and who can work in a collaborative, nonpolitical fashion, he says.