New CEO makes changes at VMware

VMware's CEO outlined changes for the company Tuesday, including a hiring freeze and plans for separate product divisions.

The executive changes may also help address turmoil that hit VMware's upper ranks. Diane Greene, its former CEO and co-founder, was ousted earlier this year. She was followed soon after by Chief Scientist Mendel Rosenblum, who is Greene's husband, and Richard Sarwal, who led research and development. Maritz addressed those departures on the call.

"My first order of business was to make sure the transition from Diane to myself went as smoothly as possible," he said. "As with any transition, we've had our challenges there, but I can report that we are making our way through them and moving ahead."

VMware will also divide its sales division into geographic regions, each with its own profit-and-loss responsibility its own senior manager, Maritz said. The company thinks it can expand significantly in Japan, Korea, Brazil, Russia, India and China, among others, he said.

Maritz also discussed competition from Microsoft. Some customers delayed purchases in the quarter to do side-by-side comparisons of the companies' products, he said. "By and large those worked in our favor," according to Maritz. "We did not see any major losses to Microsoft."

He argued that Microsoft is still behind VMware with its virtualization technology. "We don't see them catching up to us until the next 12 to 24 months, by which time we will have moved on," he said.

Executives were cautiously optimistic on the call but acknowledged that VMware's growth will continue to slow as it becomes bigger and the virtualization market matures. The company will start to follow the seasonal trends typical of the industry, which means its first-quarter revenue will likely decline compared to the fourth, said CFO Mark Peek.

The economic climate prompted some customers to avoid long-term enterprise license agreements during the quarter and buy short-term licenses instead, Peek said.

Meeting financial targets in the quarter was "certainly very challenging," Maritz said. "As we went into September, we saw uncertainty set in in a big way."

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