This Is Why You Worry About VMWare

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How much talent can VMWare (NYSE: VMW  ) afford to lose? We're about to find out. On Friday, executives at this Motley Fool Rule Breakers recommendation said that Paul Chan, a senior leader in charge of product development, has resigned.

Chan's leaving follows co-founder Diane Greene's firing by parent company EMC (NYSE: EMC  ) in July. Co-founder Dr. Mendel Rosenblum, Greene's husband, soon followed.

But the brain drain didn't stop there. Richard Sarwal, executive vice president of R&D, returned to Oracle (Nasdaq: ORCL  ) earlier this month, less than a year after leaving the database king. Finally, there's Chan.

That's four techies gone in a matter of months. Color me a little worried.

CEO Paul Maritz, himself a recent hire from Microsoft (Nasdaq: MSFT  ) , told reporters at last week's VMWorld trade show that executive turnover is inevitable. Perhaps, but VMWare is losing people who know the code that makes its products special, products now under assault from Mr. Softy's own virtualization technology.

For now, VMWare is still widely viewed as the technical and market leader by those who employ virtualization. But Microsoft's pricing tactics could have an effect long-term, according to customers and analysts interviewed by during VMWorld.

"Microsoft's main pitch is that anyone with Windows could have the hypervisor for free, so the net cost of the software is zero," data center operator Michael Tran told "Anything else is going to look expensive against it."

Agreed. The good news? That's not likely to be an issue so long as VMWare has the brainpower to be orders of magnitude better at virtualization than everyone else.

It's time to plug that drain, Mr. Maritz.

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Fool contributor Tim Beyers owned shares of Oracle at the time of publication. He also hunts for the best of tech as a contributor to Motley Fool Rule Breakers, which counts VMWare among its holdings. Here's how to try this market-beating service free for 30 days. Get access to all of Tim's Foolish writings here.

Microsoft is an Inside Value pick. The Motley Fool's disclosure policy is virtually unbeatable at Scrabble.

Read/Post Comments (4) | Recommend This Article (2)

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  • Report this Comment On September 23, 2008, at 3:50 PM, since62 wrote:

    Mr Chan made his decision back in August - old news.

    The most important news of last week was VM foray full throttle into cloud computing - now that worries Mr Softee - enough to buy back shares to bolster the share price.

  • Report this Comment On September 23, 2008, at 5:24 PM, virtuo wrote:

    "Microsoft's main pitch is that anyone with Windows could have the hypervisor for free, so the net cost of the software is zero," data center operator Michael Tran told "Anything else is going to look expensive against it."

    Even VMware has a similar thing already avaialble very long time. Basic VMWare server is always free and it ca host any OS not just windows. But companies are not interested in that sort of thing. What i have seen with virtualizzation is performance and stability issues. If microsoft can provide better performance it will be good.

  • Report this Comment On September 23, 2008, at 7:40 PM, kv62 wrote:

    Not only VMware Server is free, ESXi 3.5 was recently made available for free download and use. There is no OS required. So, if my math is correct here, the total cost is ZERO. Using HyperV still require a Windows 2008 licnese which is not free. That makes HyperV more expensive than ESXi.

  • Report this Comment On September 24, 2008, at 2:41 PM, teddy4money wrote:

    Do you honestly believe that the executives are the ONLY people who know the code? What a "corporate" outlook.

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