VMware Inc. today chose a longtime insider to lead the company through a major product line makeover and an impending spinoff from parent Dell Technologies Inc.

Raghu Raghuram, 58, is currently executive vice president and chief operating officer of products and cloud services. He will take over as chief executive on June 1 following the departure of former CEO Pat Gelsinger in January for the top at Intel Corp. after more than eight years leading VMware. Raghuram was appointed after some external candidates turned down the job, Yahoo! Finance reported.

An 18-year veteran of the company, Raghuram helped grow the core virtualization business in VMware’s early days, headed its software-defined data center strategy and architected its cloud computing business. He has also been instrumental in VMware’s large successful acquisitions strategy, the company said. Still, he was seen by some observers as a dark horse for the job.

“I’m surprised the board went with an insider, as Silicon Valley often seeks to cross-pollinate with leaders from elsewhere,” said Glenn O’Donnell, a research director at Forrester Research Inc., “but Raghu is a very smart man who knows the VMware business and customers well.”

“The market may have been thinking about [current Chief Operating Officer] Sanjay [Poonen] because he’s quite dynamic,” said Bola Rotibi, research director for software development at CCS Insight Ltd. “But it’s not just about the dynamism. It’s having the vision and knowledge of the market to know what the portfolio needs to be.”

“VMware has always been an engineering-driven company; Raghuram clearly fits that mold and he’s also led or been in the senior leadership teams for some of the company’s most strategically important businesses,” said Charles King, an analyst at Pund-IT Inc. “He’s a solid choice and I expect he’ll succeed.”

Under Raghuram, VMware engineered a series of partnerships with the major cloud infrastructure vendors, including a landmark deal with Amazon Web Services Inc., that have given it a pole position in helping large enterprises migrate to the cloud. The company has built upon its dominance in virtualization within the data center to position itself as a universal onramp to the public cloud.

“Raghu has been right there with Pat driving that strategy,” Rotibi said. “He understands VMware. Does he have the guts to take VMware to what it needs to keep growing? I think he does.”

VMware’s choice of an insider indicates that the company is confident about its strategy and portfolio, King said. “You don’t usually look to an outsider to take over a winning team,” he said. “Picking a deeply experienced executive like Raghuram implies that the company will maintain a steady course.”

More recently, Raghuram led VMware’s Tanzu initiative, which bundles a number of internally developed and acquired products into a package aimed at customers who are looking to modernize their applications around cloud-native principles.

“VMware is uniquely poised to lead the multicloud computing era with an end-to-end software platform spanning clouds, the data center and the edge, helping to accelerate our customers’ digital transformations,” Raghuram said in a statement.

“It’s fair to credit him as instrumental to the company’s success,” said Ian Campbell, CEO of Nucleus Research Inc. With the divestiture from Dell looming, “It is critical to have leadership that understands the core competencies and defensible niche VMWare currently has to ensure it doesn’t get distracted from initiatives that have already begun to bear fruit,” he said.

In other personnel moves, Sumit Dhawan, who is currently senior vice president and chief customer officer, will become VMware’s president, overseeing worldwide sales, partner relation, customer experience, marketing and communications. Zane Rowe, who served as interim CEO during the board’s search for a successor, will return to his job as chief financial officer.

Poonen will leave the company after seven years. Seen as a leading contender for the CEO job, he nonetheless extended his “warm congratulations” to Raghuram in a statement and added that “he will take the company to new heights.”

Analyst King called Poonen’s departure “a loss. He has been an important part of VMware’s leadership team. But he should have numerous options to choose from” in finding a new position.

“Nobody should be surprised by his departure,” said Forrester’s O’Donnell. “Watch for him to land a CEO job somewhere else in the Valley.”

VMware also released preliminary earnings estimates this morning in advance of its formal earnings release on May 27. Fiscal first-quarter revenue and profit are expected to beat estimates based on strong subscription and license revenue.

Revenue is estimated to come in at $2.99 billion, up 9.5% from the first quarter of fiscal 2021. The combination of subscription, software-as-a service and license revenue is expected to show 12.5% growth, to $1.39 billion. Net income is forecast to be $1.76 per diluted share. Analysts had expected and earnings per share of $1.51 on revenue of about $2.91 billion.

Investors had little reaction to the numbers of Raghuram’s selection, with VMware stock dropping about 2.5% by mid-day, in line with a broader sell-off on the Nasdaq.

Photo: VMware