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.

Three months after being made VMware's CEO, Paul Maritz has announced changes at the company that are designed to help it ride out the economic storm while at the same time changing from a fast-growing startup into a mature software company.

The changes include implementing a hiring freeze -- or "hiring pause," as Maritz put it -- that started during the third quarter and will probably last into 2009. He will also divide VMware into separate business units to handle different areas of product development and appoint new senior executives to manage those divisions.

The changes were announced after VMware reported solid third-quarter financial results Tuesday, including profits that were ahead of expectations. But they also come as the IT industry braces for an expected slowdown in customer spending, and as VMware in particular exits a heady period of rapid growth.

Revenue at the virtualization software company grew 37 percent in the third quarter, to US$472 million. That compared with growth of 54 percent in the second quarter, 69 percent in the first, and 80 percent in the fourth quarter of last year.

"VMware is coming off a period of very rapid growth, so it's a healthy thing in any case to take stock and make sure we have people focused on the right areas," Maritz said during a conference call Tuesday, in reference to the hiring freeze. "But it's also too soon to say what will happen in 2009" in terms of customer spending, he said.

"We'll suspend new hiring except for important and strategic hires," Maritz said. "We'll continue this into the fourth quarter, and frankly into 2009 as well."

The company joins SAP and Microsoft, among others, in its decision to limit hiring amid the economic slowdown.

Maritz said dividing the company into separate product divisions will help it to execute on its plans while it continues to expand. He didn't say how those divisions would break down. They each will have a separate research and development group but will share a common sales and marketing force, he said.

"We're still working our way through the details; our intent is to have them ready and implemented as we go into 2009," Maritz said. The company will hire or promote a senior executive to run each division, he said.

The move comes as VMware expands its technology roadmap into new areas. At VMworld in September, the company said it would build a "virtual datacenter operating system," including new products for virtualizing not only servers, but also network and storage gear. It is also developing products to let companies link their data centers to those of cloud computing service providers.

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