VMWare Inc. (VMW) - Get VMware, Inc. Report shares slumped lower in early trading Wednesday after its CEO was tapped to replace the outgoing Bob Swan at Intel Corp. (INTC) - Get Intel Corporation Report.
Pat Gelsinger will replace Swan, who is setting down after two and a half years at the helm of the struggling chipmaker. He will, however, remain on the board of VMWare, with CFO Zane Rowe acting as interim CEO. Intel called Gelsinger a "roven technology leader with a distinguished track record of innovation, talent development, and a deep knowledge of Intel." VMWare said.
Gelsinger's departure could complicate Dell Technologies Inc.'s DELL plans to spin-off VMWare, in which it holds an 81% controlling stake, following a September 21 date -- five years on from its purchase from EMC Corp. -- that would allow for a tax-free transaction.
(NB: an earlier version of this story incorrectly stated that the tax advantage would expire on September 21. TheStreet regrets the error.)
“I speak for the VMware Board of Directors, executive management and employees in expressing our gratitude to Pat for his leadership at VMware, and we are thrilled to keep him on as a member of the Board,” commented Michael Dell, VMware Chairman of the Board.
“As CEO for the past eight years, Pat led the company’s tremendous growth and expansion and built a solid foundation for future innovation. Zane has been a key strategic partner to Pat during this time of growth. His deep knowledge of the company and strong relationships will lead the team well through the transition period.”
WMWare shares closed 6.8% lower at $133.20 each. Dell shares were marked 7.2% lower at $71.23 each.
Intel shares, meanwhile, surged 6.97% to a July 2020 high of $56.95 each.
"We express our gratitude to Pat Gelsinger for his eight years of strong leadership as CEO of VMware and wish him the best in his new role," Michael Dell said in an emailed statement to TheStreet. "During his tenure at Dell Technologies, Pat worked tirelessly to position VMware for tremendous growth and expansion and built a solid foundation for future innovation – and I’m thrilled he’ll remain on the VMware Board. The VMware management team is strong and won’t miss a beat during the transition and naming of a new CEO.
"As it relates to the form 13D/A we filed on July 15th with the SEC disclosing Dell Technologies is exploring a spin-off of our 81% equity ownership in VMware, nothing changes," he added. "Negotiations on the VMware side are being led by a special committee of the Board; workstreams continue. As both companies have stated, we believe a tax-free spin could drive shareholder, team member and customer value by simplifying capital structures and enabling flexibility."
"Our strong partnership with VMware continues - working together to bring innovative solutions to customers," Dell said. "It is business as usual."