Skip to Content
Stock Analyst Update

VMware CEO Departure Provides Buying Opportunity

We are maintaining our fair value estimate of the narrow-moat company and view the shares as undervalued.

Mentioned:

On Jan. 13, Pat Gelsinger stepped down as narrow-moat (VMW) VMware’s CEO and will take the helm at Intel. Bob Swan will leave Intel’s leadership role on Feb. 15. Gelsinger will remain a VMware board member. VMware CFO Zane Rowe will act as interim CEO as VMware’s board searches for a permanent replacement. VMware shares fell 7% midday on the news.

We understand the market reacting negatively to the departure of a CEO who we believe has done a commendable job at VMware; however, this can create a buying opportunity for investors. Gelsinger, who had been CEO at VMware since 2012, has profoundly pivoted the company over the last few years, turning VMware into a key component of cloud infrastructure while expanding into high-growth vectors and away from core virtualization solutions. We believe Gelsinger has strongly led VMware’s direction by turning potential headwinds into growth opportunities. Although taking over at VMware comes with the additional challenge of Dell’s ownership, we believe a new CEO will be well positioned to keep the strong momentum rolling with VMware’s subscription and as-a-service offerings. We are maintaining our $202 fair value estimate and view the shares as undervalued.

Although details are sparse, we expect that VMware could tap one of its chief operating officers. Sanjay Poonen, COO, customer operations, has been at the company since 2013 and is responsible for VMware’s worldwide sales, services, support, marketing, and alliances, as well as the security business. Raghu Raghuram, COO, products and cloud services, has been at VMware since 2003 and has ownership of all product and service offerings and centralized services, support, and operational functions. We believe that either one would be well equipped to keep the strategic imperatives with profound familiarity of the inner workings of the company, but we expect VMware’s board to perform an extensive global search for the proper leader.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

Mark Cash does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.