July 8 (Bloomberg) -- VMware Inc. ousted founder and Chief Executive Officer Diane Greene and said 2008 sales will trail its projections, sending the stock to the biggest drop in six months.

VMware, the largest maker of software that lets computers run different operating systems, fell 24 percent in New York trading. Sales will be ``modestly below'' the previous goal of a 50 percent increase, VMware said today in a statement.

Greene, 53, may have disagreed with officials at parent EMC Corp. over how much independence to give VMware, according to Stifel Nicolaus & Co. analyst Todd Weller in Baltimore. EMC sold a stake in the company last year, in the biggest initial public offering for a technology company since Google's in 2004.

``There were tensions between VMware and EMC,'' said Weller, who has a hold rating on the shares. ``For VMware's technology and products to thrive, they need strong partnerships with EMC's competitors.''

VMware, based in Palo Alto, California, dropped $13 to $40.19 at 4:05 p.m. in New York Stock Exchange composite trading. The shares have fallen 53 percent this year. EMC declined $1.75, or 12 percent, to $13.39.

Paul Maritz, an executive at EMC who once worked at Microsoft Corp., will replace Greene. EMC now owns about 86 percent of the company, whose programs help customers save money on maintenance and power by using fewer machines. The software competes with products from Microsoft.

Greene's History

Greene may have pressed EMC to spin off the rest of VMware, BMO Capital Markets' Keith Bachman said in a report today. The appointment of an ``EMC person'' lowers the chance of another stock sale early next year, said the New York-based analyst, who advises investors to buy stock in both companies.

Greene founded VMware in 1998 with husband Mendel Rosenblum, the company's chief scientist and a computer-science professor at Stanford University. The technology for VMware's products stems from Rosenblum's research at Stanford, and the ``VM'' stands for virtual machine. Rosenblum said in an interview today that he hasn't decided on whether to leave the company.

Greene has a bachelor's degree in mechanical engineering and master's degrees in naval architecture and computer science. She ranked as the 22nd most powerful woman in business in 2007, according to Fortune magazine. Greene wasn't available to comment, Rosenblum said.

Termination Package

Greene was entitled to $47.5 million if she were terminated without cause as of Dec. 31, the company said in an April filing. That package included $44.6 million in stock options. VMware traded at $84.99 on Dec. 31, more than double its current price. Greene's options have strike prices ranging from $18.30 to $23.70, according to a regulatory filing.

Greene held 100,610 shares in VMware, less than 1 percent of the company, as of Jan. 31, according to Bloomberg data.

EMC acquired VMware in 2004 for $635 million. The Hopkinton, Massachusetts-based maker of storage computers raised $1.1 billion from selling a minority stake in the company, compared with the $1.92 billion generated by Google's IPO.

VMware, which plans to announce second-quarter results on July 22, declined to update its goals for the period. In April, VMware forecast that sales would rise about 55 percent from a year earlier.

Technology Spending

Growth in U.S. information-technology spending may slow to 5 percent this year from 7 percent in 2007, Goldman Sachs Group Inc. said in a May 1 report.

``The slowing global economy is starting to impact their business,'' said Brent Bracelin, an analyst with Pacific Crest Securities in Portland, Oregon. He recommends buying the shares, which he doesn't own. ``There's growing concern around IT spending.''

Last month, Microsoft, the world's biggest software maker, introduced its Hyper-V product, which competes with VMware's programs. The Redmond, Washington-based company put the software out a month earlier than forecast.

``VMware is changing as a company, with serious competition sprouting around them,'' said Tom Bittman, an analyst with research firm Gartner Inc. in Stamford, Connecticut. ``Paul Maritz brings experience at a very high level at Microsoft, and he may well find ways to help the two companies work together.''

To contact the reporter on this story: Melita Marie Garza in New York at mgarza4@bloomberg.net; Vivek Shankar in San Francisco at vshankar3@bloomberg.net

Last Updated: July 8, 2008 16:17 EDT