VMware stock drops over 7% after news that CEO Pat Gelsinger will head to Intel

• Shares of VMware, Inc. slipped over 7% Wednesday on news the company's CEO Pat Gelsinger is headed to Intel.
• Gelsinger will be replaced by CFO Zane Rowe in the interim while the board and majority stakeholder Dell Technologies decide on a replacement.
• Michael Dell, Chairman of the Board at VMware, commented on Gelsinger's departure, saying, "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."
• Gelsinger led VMware to a 12.46% increase in revenue during 2020.

Shares of VMware, Inc. are down over 7% Wednesday on news the company's CEO Pat Gelsinger is headed to Intel.

Gelsinger is stepping down after almost ten years at the helm of the Palo Alto-based virtualization and cloud computing software provider, although he will remain on the board.

CFO Zane Rowe has taken on the role of interim CEO at the company as the board searches for a permanent replacement.

Michael Dell, Chairman of the Board at VMware, commented on Gelsinger's departure, saying, "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."

Dell continued, "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."

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VMware was founded in 1998 and then acquired by EMC Corp. in 2004. Just over a decade later, in October of 2015, Dell Technologies entered into an agreement to buy EMC Corp. for $67 billion.

Now Dell owns approximately 81% of VMware. As a result, Dell shares are also down over 7% on Wednesday.

The news of Gelsinger's departure affected Dell so significantly because the company had planned to spin-off its majority stake in VMware to shareholders, as reported by the Wall Street Journal in the summer of 2020.

RBC Capital analyst Rober Muller called the management transition "an additional but manageable hurdle" for Dell's potential spinoff in a Wednesday note. Although he argued there might be delays as a result, Muller also noted Dell's majority stake would allow the company to 'steer' the decision on a new CEO.

Gelsinger described serving at VMware as "the honor of my lifetime" in a statement Wednesday.

Gelsinger led VMware to a 12.46% increase in revenue during 2020, helping the company break the $10 billion mark for the first time.

Shares of VMware were down to intraday lows of below $132 per share on Wednesday, and shares of Dell fell over 7.5%. Meanwhile, Intel shares jumped on the news, up almost 8% on the day.