CEO Change, Business Conditions, Spin-Off Possibility Factor Into Analyst Views on VMWare

7/9 - "Several analysts this morning actually asserted that replacing Greene with former Microsoft exec Paul Maritz should be considered a positive development for the company. “It was not a completely unexpected move,” writes Citigroup’s Brent Thill. “We believe Greene did an admirable job taking the company from zero to over $1.3 billion in 2007 revenue, but a different leader seems needed for the next leg in VMW’s story.”

"All across the Street, analysts slashed estimates on the company. Lehman’s Israel Hernandez, for instance, dropped his target on the stock to $41, from $75, and gave four reasons for caution on the stock, even at the newly reduced share price: Guidance may be too high given macro weakness; building competitive pressures; additional senior management changes; the impact on employee morale from founder Greene’s departure."

"Citi’s Thill, who maintains a Buy rating on the stock, nonetheless cut his target to $52 from $80, and noted that the reduced guidance for 2008 reflects “macro issues which are elongating sales cycles and causing customers to break deals into smaller pieces.”

"Another key takeaway from the management change is that it appears to make it less likely that EMC Corp. (EMC) will spin off its 86% stake in the company; that no doubt will be disappointing to some EMC holders, who see a spin-off as a way to increase shareholder value. On the other hand, RBC Capital’s Thomas Curlin contends that the issue is not whether EMC wants to spin out its VMW stake, but rather “what they will be forced to do by shareholders” if EMC shares continue to trade in the mid-to-low teens."