VMware Taps Gelsinger As CEO, Maritz To EMC As Chief Strategist

VMware Tuesday confirmed that Pat Gelsinger will be taking over for Paul Maritz as VMware CEO, with Maritz moving over to EMC in the role of chief strategist. The changes will take effect on Sept. 1.

The leadership switch, which CRN first reported on Monday, is aimed at establishing VMware as a force in software-defined networking, big data, and automation and management to support future applications, EMC Chairman and CEO Joe Tucci said in a conference call held to announce the management shift.

Maritz has done a bang-up job of establishing virtualization as the default way to run applications, Tucci said. But, VMware came late to the software-defined networking space and believes new leadership is needed to help it address new priorities in the data center.

[Related: VMware Blockbuster: Maritz Out As CEO After Four-Year Tenure ]

However, Maritz is not being pushed out: According to Tucci, Maritz actually recommended Gelsinger for the VMware CEO role, describing him as "a near perfect executive" to lead the company.

"VMware is at the point of embarking on the next leg of its exciting journey. This represents an excellent time to introduce new leadership," Tucci said on the call.

VMware is making the change now because customers are on board with its vision for cloud infrastructure and end-user computing, Tucci said. "One thing I have learned is that the time to make these changes is from a position of strength, when you are performing well and have customers' permission to play in new markets," he said.

Gelsinger, who was previously president and COO of EMC's information infrastructure products division, has extensive experience in the x86 ecosystem from his 30-year career at Intel, which will translate well to VMware's own partner ecosystem, Tucci said.

Maritz is keeping his seat on VMware's board of directors, and he will continue to work with VMware in a strategic capacity. "This transition will free up my time to think about some interesting things that can be done on the new foundation of cloud infrastructure," Maritz said on the call.

Despite the official explanations, the VMware leadership shake-up came as a major shock to VMware partners and analysts. VMware's recent financials have been solid -- revenue grew 25 percent and earnings per share jumped 37 percent in the company's fiscal first quarter -- and its recent hiring of longtime HP channel executive Frank Rauch was interpreted by partners as a promising sign for channel relations.

Yet in discussions with VMware partners, there is a sense that VMware is at a crossroads. Maritz is an engineer at heart, and his leadership of the company to date has been primarily technology focused. But to win the battles that loom in the data center, VMware will need to convince business leaders that the integrated approach it provides is the best path, partners told CRN.

NEXT: Partners Say VMware Is At Crossroads

While Maritz is certainly capable of tackling this business challenge, engineers generally prefer to focus their attentions on more strategic tasks, which is what he will be doing at EMC.

"Paul was a great leader for VMware, as during his tenure they needed to rapidly evolve the technology, and he has done that. But, I see Paul as more of a technologist than a business leader," said Scott Miller, director of cloud and virtualization at World Wide Technology, a Maryland Heights, Mo.-based solution provider.

Maritz's strategy and execution over the past four years has been impressive, and his leadership has been good for the partner community, Ron Dupler, CEO of GreenPages, a Kittery, Maine-based VMware partner, told CRN.

That said, the future challenges VMware is facing are different from those it has faced in the past, Dupler said. "VMware is fighting battles on a number of fronts right now," he said. "There is a difference between thought leadership and strategy creation and execution."

Gelsinger during the conference call confirmed earlier reports that EMC will be adding virtualization technology to its storage product lines. "All EMC storage assets will become virtual appliances, and all storage assets will run virtual machines," he said.

While VMware's technology is solid, business leaders are having a tough time making sense of the business model changes that come with the virtual appliance model, and Gelsinger could help devise a better business strategy for making the benefits more clear, Miller said.

"VMware would like to see faster adoption of virtual appliances by its hardware partners, and it's going to take someone [in the CEO role] to help those organizations understand the business value for them," Miller said.

VMware also reported preliminary second quarter results Tuesday: The Palo Alto, Calif.,-based vendor expects revenue of approximately $1.123 billion, up 22 percent year over year and in line with its guidance of $1.100 billion to $1.120 billion. VMware is expecting non-GAAP operating margins of around 32 percent, compared to its guidance of 30.25 percent to 31.25 percent.

For fiscal 2012, VMware is expecting revenue of between $4.540 billion and $4.635 billion and non-GAAP operating margins between 30.25 percent and 31.25 percent.

PUBLISHED JULY 17, 2012