There's a serious brain drain going at VMware that no one's talking about (VMW)

There's a serious brain drain going at VMware that no one's talking about (VMW)

Business Insider

VMware

VMware announced on Tuesday that its President and COO Carl Eschenbach is leaving the company.

The news came as a bit of a surprise given Eschenbach was effectively the #2 guy behind CEO Pat Gelsinger.

But a closer look at VMware shows the top-level exodus has been quietly going on for a while, and Eschenbach is just the latest in a series of recent executive departures at the company.

Here's a quick run-down of its recent executive departures, based on LinkedIn profiles:

Jonathan Chadwick, CFO: Announced resignation last month

Ben Fathi, CTO: Left in September 2015 to join CloudFlare as Head of Engineering

Charles Fan, SVP and GM VSAN: Left in February 2016 to join Cheetah Mobile as CTO

Riccardo di Blasio, SVP vCloud Air Sales: Left in October 2015 to join Sequoia-backed Cohesity as COO

Simone Brunozzi, VP and Chief Technologist: Left in January 2016 to join stealth startup

Mathew Lodge, VP of vCloud Air Marketing: Left in August 2015 to join Accel-backed startup Weaveworks as COO

Diane Gonzalez, VP of vCloud Air Platform: Left in August 2015 to join Amazon as VP of Commerce Platform

Scott Collison, VP and GM vCloud Air: Left in September 2015 to join Bessemer-backed startup Nitrous as CEO

Ramin Sayer, SVP of Management: Left in December 2014 to join Sumo Logic as CEO

Martin Casado, GM and SVP of Networking: Left in February 2016 to join Andreessen Horowitz as general partner

That means in the past year alone, VMware has lost at least 11 of its top executives. On top of that, VMware announced last month that it would be laying off 800 employees, after giving lowered revenue guidance for the upcoming year.

So what's causing all this change? One former executive we spoke to blamed the current management structure, in which its parent company EMC holds about 80% control of the company. That allows EMC CEO Joe Tucci to have outsized influence over the company's direction, and his hands-on approach only intensified after activist investor Eliot Management took a larger stake in the company.

On top of that, the proposed merger between EMC and Dell is worrying a lot of people internally that the company would end up turning into a slowing company with no fresh innovation. VMware has lost almost 40% of its share value since the proposed merger was first announced in October 2015.

"They’re gonna turn into your dad’s software company," this person said.

Of course, this is one person's opinion, so it should be taken with a grain of salt. But Wall Street seems to be taking note of this trend, too, as FBR & Co. analyst Daniel Ives wrote in a recent note:

"We do have major worries about an exodus of employees of VMware wanting to run away from this situation and believe some execution issues can result from this deal, a dynamic VMware hinted at with its conservative 2016 outlook. This will remain a hot-button issue around the VMware story until the company proves otherwise, in our opinion."

When we asked VMware about it, its spokesperson told us this is just part of the company's natural transformation cycle, and pointed us towards its deep executive bench.

"Leadership change is a natural part of every company’s evolution and there is no connection between any of the departures. We continue to attract outstanding talent to the company and we have an extremely strong leadership bench," VMware's spokesperson said.

In fact, some of the executives on its bench, including sales leader Maurizio Carli, CTO Ray O'Farrell, and executive VP Sanjay Poonen were all promoted today to take on bigger roles within the company.

Regardless, with all the management change going on, the situation at VMware will continue to raise question marks for the rest of the year.

"Customers will lose confidence in the company," the former exec we spoke to said. "Where exactly is the company going?"

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