VMware CEO Change Pressures VMW Shares

VMware stock (NYSE: VMW) is down 3 percent today as Wall Street worries about an apparent CEO change, growing competition from Microsoft Hyper-V, and uncertainty surrounding VMware’s cloud computing business. Time for VMware channel partners to panic? Absolutely not. Here’s why.

First, the blow-by-blow:

• VMware apparently will name Pat Gelsinger as CEO, succeeding Paul Maritz.
• The company may spin off some of its businesses, including Cloud Foundry (platform as a service).
• Microsoft Windows Server 2012 with new Hyper-V virtualization capabilities will ship in September 2012. Microsoft has already started a “switch to Hyper-V” campaign vs. VMware. Also, Red Hat is promoting KVM (kernel-based virtual machine) as an open source alternative to VMware.
• VMware is set to announce quarterly results on July 23.

All of that uncertainty has made VMware investors nervous. VMware’s shares are down roughly 25 percent in the past three months, and down 3 percent today among the CEO change rumors.

VMware has declined to comment about the alleged CEO change, stating that the company doesn’t comment about rumors. Um, a CEO rumor demands a comment. Investors need to know who is running VMware today and for the long haul.

Nevertheless, there’s no need for VMware partners to panic. The company has a massive installed base that continues to grow. And cloud computing provides the next logical stepping stone for VMware partners.

Worth Watching

Instead of shifting into panic mode, VMware channel partners should:

• Study the July 23 earnings release: How will Wall Street, investors and customers react?
• Closely follow VMworld in August 2012 for more clues about VMware’s overall health, and partner ecosystem health.
• Monitor the Windows Server 2012 with Hyper-V launch in September 2012. Are channel partners really shifting customers from VMware to Hyper-V? And if so at what rate?

Partners that study those three inflection points should be in good shape to plan their virtualization strategies for 2013 and beyond.