The news that VMware CEO Pat Gelsinger, widely regarded as one of the best CEOs in tech, will leave the virtualization giant and return to Intel as its CEO shook the industry this morning. And the general consensus among pundits and analysts is that his departure doesn’t bode well for VMware — at least in the short term.

Late last year VMware lost two of its top executives: former COO Rajiv Ramaswami left for the chief executive post at Nutanix, and Cloud Management SVP Ajay Singh jumped ship to Pure Storage. Additionally, Gelsinger’s departure comes as VMware continues to hammer out its years-in-the-making possible split from parent company Dell Technologies, which many expect to happen later this year.

“This was shocking,” said Zeus Kerravala, principal analyst at ZK Research, in an email to SDxCentral. “I felt that Pat [Gelsinger] was the heir apparent to Michael Dell to run all of Dell Tech when Michael chose to step down. This isn’t good news for VMware, whose executive ranks have already been thinned out.”

Gelsinger served as VMware’s CEO since 2012. During his tenure, he oversaw more than 30 acquisitions and successfully pushed the company into networking, cloud, security, containers, and 5G. Meanwhile, he nearly tripled revenue to $12 billion.

“VMware, like most companies, is going through some major transitions as it pivots to distributed cloud, security, networking, and containers,” Kerravala said. “This is where strong leadership is needed to ensure the company doesn’t favor short-term success over long-term transformation.”

Shortly after Intel confirmed that Gelsinger would replace Bob Swan on Feb. 15, VMware announced that its board of directors has begun its search for a new CEO and that existing CFO Zane Rowe would take over as interim CEO.

What Does Gelsinger’s Departure Mean for Dell Spinoff?

In addition to leaving a big VMware vacancy, Gelsinger’s departure further complicates its potential separation from Dell Technologies. Dell owns 81% of VMware, and last July the parent company admitted it was exploring a VMware spinoff — its second such what-to-do-with-VMware discussion in two years. Later in 2020, Dell said it wouldn’t make any final decisions about VMware until September 2021.

Just yesterday, at the Goldman Sachs Virtual Technology and Internet Conference, Gelsinger noted “this little thing going on with Dell.”

September, Gelsinger said, will mark the 5-year anniversary of the Dell-EMC merger. “And after that, hey, we could see that [spinoff] occur,” he said. “We’re, of course, continuing to work on that to create a deal that’s good for all of the stakeholders … but of course importantly, a continued great relationship with Dell as well.”

Gelsinger’s departure is “a big loss” for VMware, said BMO Capital Markets analyst Keith Bachman in a research note. “In particular, we think Mr. Gelsinger does not get enough credit for playing a meaningful role in balancing the interest of VMware and Dell, which in our judgement is not an easy undertaking,” he wrote. “Further, VMware is currently in a delicate position in its relationship with Dell, given the potential for a spin in September of this year.”

Dell, VMware’s ‘Tumultuous Separation’

While Gelsinger returning to Intel where he spent 30 years isn’t directly tied to the Dell spinoff, it certainly does complicate matters.

“That whole separation has been tumultuous,” Gartner analyst Mark Lockwood said. “Two-and-a-half years we’ve been hearing rumors, seeing some signs, and while I don’t think Pat’s leaving has to do with the separation — I really do believe that Pat is going to Intel because Pat loves Intel and it’s a challenge — it’s a little too early to guess how this impacts that [potential spinoff]. Michael Dell is probably going to play a pretty key role in not just replacing Pat, but how that plays out long term for the two companies.”

Who’s on the Short List?

Because the announcement was so sudden and unexpected, no one has a running list of future VMware CEO candidates. Ramaswami and Singh both seem to be out of the running now that they’ve left for Nutanix and Pure Storge, respectively. And while Rowe remains a possible candidate who may move from acting to full-fledged CEO, replacing Gelsinger, an engineer, with a finance guy seems like a longshot. Promoting Sanjay Poonen, VMware’s COO of customer operations, would be a more likely choice.

Poonen joined VMware in 2013. In addition to leading the company’s worldwide sales, services, support, marketing, and alliances efforts, he’s also responsible for VMware’s security strategy and business — one of its newer areas of focus that Poonen plans to grow into a multi-billion-dollar business.

“If they promote internally, it would be Sanjay Poonen,” Kerravala said. “He’s been the person responsible for many of the executions the company has and could be viewed as Spock behind Gelsinger, who was Kirk.”

Both Lockwood and Forrester VP Glenn O’Donnell agree that Rowe and Poonen are likely on the internal candidate short list.

“I believe the next CEO should be a product person rather than a pure finance person,” O’Donnell said in an email to SDxCentral. “VMware is a Silicon Valley stalwart, but the stereotypical brilliant but unrelatable Silicon Valley leader likely isn’t the right leader for VMware. The CEO of this company needs to be brilliant for sure, but also well-grounded in what its customers truly need. A paradoxical blend of bold vision, business pragmatism, and charisma will keep VMware growing well.”

It’s worth noting that Gelsinger will remain on the VMware board of directors, and this means he will likely play a major role in selecting his successor.

Opportunity to Make Good on Gender Parity Pledge

If the board brings in an outside executive to lead VMware, that will send a strong signal about the company’s future direction.

“Are they going to focus on licensing and focus on doubling down on what they have, or are they going to continue to do what Pat did, which is expand, expand, expand? They have gotten very broad as they’ve moved into containers, security, and networking,” Lockwood said. “VMware obviously is still in a current relationship with Dell. Will someone come out of that? Or will they look to one of the hyperscale cloud providers like Amazon, Microsoft, Google? The future is the cloud, and they’re gonna need someone to help them navigate that.”

VMware recently committed to achieving gender parity — one of 30 goals it pledged to meet by 2030 — and the CEO hiring process also presents an opportunity for VMware to “step up its diversity efforts,” Kerravala said. “If they go outside the company, I’d like to see them hire someone like Gerri Elliott from Cisco or Deb Shoquist from Nvidia. Given the world is becoming more network centric and AI driven, those types of hires make sense to me.”

A CEO change “can be disruptive, especially for a company doing well, and VMware performed very well under Gelsinger,” according to O’Donnell. Wall Street certainly did not like the news of Gelsinger’s departure, which sent VMware’s shares down more than 7% at midday. But ultimately VMware will bounce back, he concluded.

“A great company is bigger than its CEO,” O’Donnell said. “Certainly, a great CEO fuels growth and a bad CEO can do a lot of damage. VMware will likely be fine. Its board is solid and will ensure the next CEO carries the company forward.”