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Will a VMware cloud spin-off follow the CEO shift?

VMware has made several moves recently to broaden its market base beyond virtualization. Could a cloud-focused spin-off be next?

VMware has made several moves recently to broaden its market base beyond its virtualization roots and appears poised to spin off a cloud-focused firm that could help it compete in the burgeoning cloud market, though details of the much talked-about move remain under wraps.

Information about a new cloud division surfaced earlier this week along with reports that VMware Inc. would swap out CEO Paul Maritz for Pat Gelsinger, currently the president and COO of EMC’s Information Infrastructure Products division.

VMware confirmed the CEO switch on Tuesday but did not disclose any details surrounding the creation of a separate entity that would oversee the vendor's Cloud Foundry Platform as a Service (PaaS) offering, as well as other cloud products.

The company declined to comment on spin-off chatter and recent reports say VMware has called the idea of a spin off “unfounded.”

But industry watchers see plenty of reasons such a move would make sense for the company as it tries to make a name for itself as a cloud computing vendor.

If you really want to spread your PaaS as wide as possible, you'll want to make it run on any infrastructure from any vendor. So a separate company allows them to focus on doing that...

Gary Chen, research manager at IDC

One reason VMware may want to deliver its cloud assets under a separate company is that PaaS components run independent of the underlying Infrastructure as a Service (IaaS) or virtualized infrastructure, so there would less conflict of interest between VMware's proprietary infrastructure and its competitors infrastructure, explained Gary Chen, research manager for cloud and virtualization system software at Framingham, Mass.-based IDC. 

At the same time, VMware will try to avoid alienating current partners and customers.

"My sources tell me that it won't be immediate, but will be part of a multi-step process ... My guess is that VMware doesn't want to confuse the marketplace and have them stop purchasing existing [products] when they might be dealing with a new company later," a VMware partner who requested anonymity said.

In early July, the company announced its intention to buy DynamicOps, Inc., which makes cloud management software that works with multiple hypervisors -- not just VMware's. It’s a conflict of VMware’s interest to support competitor hypervisors, but the company has no choice.

"If you really want to spread your PaaS as wide as possible, you'll want to make it run on any infrastructure from any vendor," IDC’s Chen added. "So a separate company allows them to focus on doing that without the conflict of being preferential to VMware infrastructure."

The company has added support for other tools as well. Last week, VMware shipped the latest update to its database lifecycle management tool for vSphere, vFabric Data Director 2.0, which adds support for Oracle 10gR2 and Oracle 11gR2 as well as vFabric Postgres 9.1.

"The addition of Oracle support shows that VMware is serious about providing the management tools necessary to virtualize RDBMS with Oracle being the most important one to add to the list," said Jeff Reed, director of application development for Logicalis Group, an enterprise cloud provider based in the U.K. "The next thing they need to add is Microsoft SQL Server [support]."

Still, it remains to be seen how well VMware's cloud strategies and tactics will play out over time.

Many observers feel VMware needs to expand into new markets or remain typecast as just a virtualization player.

"The bigger question is which products and people are going to be moved from EMC and VMware to form this new -- and obviously higher-growth -- company that will divorce it from the legacy 'infrastructure' virtualization business that is reaching its peak for growth," Reed added.

VMware certainly isn’t getting out of the virtualization business. It remains the company's cash cow. The company announced this week preliminary second quarter 2012 results that included record revenues of $1.123 billion, up 22% from this time last year.

But as cloud computing grows in popularity, the company cannot simply rest on its virtualization laurels. Otherwise, it will stagnate as previous top dogs have done in the past.

As for its CEO changes, Maritz will remain on the company's board, and will hold the title of technology strategist at majority shareholder EMC Corp. Gelsinger, who spent 30 years in various executive roles at Intel Corp. before joining EMC in 2009, will take over for Maritz on September 1.

Stuart J. Johnston is Senior News Writer for Contact him

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Should VMware and EMC spin off their cloud offerings into a separate company?
Yes because the separate entity could focus soley on the rapidly expanding cloud service business, while touting compatibility will VMWare and many other XaaS service providers.
Does not make business sense...
It offers a broader business opportunity at the macro level and dims the vendor lcok in discussions.
The best thing EMC did when they acquired a majority share in VMWare was to allow VMWare to continue operating as an "independant" company. Having a dedicated company focussed on cloud would help clarify the role of each company and allow each company to focus on what it does best - EMC = hardware, VMWare = Virtualisation Technologies
EMC can use other divisions as leverage to help build up the vCloud.
Make systems based PaaS with private focus.
The flexibility of using the Data center of choice must be left to the Cloud Clients throu the spin off. VMW and EMC must compete with the rest of the cloud data centers and improve effectiveness with existing brands.
Why not? Imagine how much they will learn about their competitors?
too much confusion on the market