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Jan 26 2009   11:13AM GMT

Suit says former VMware CEO broke securities law

Bcournoyer Brendan Cournoyer Profile: Bcournoyer

A law firm with a history of suing public companies has set its sights on former VMware CEO Diane Greene.

Holzer Holzer & Fistel, an Atlanta firm, has filed a class-action lawsuit against Greene and CFO Mark Peek. The suit says the two execs broke the law because they didn’t tell shareholders that VMware was facing increased competition, taking a longer time to close deals and signing more customers to short-term contracts. The firm put out a press release last week seeking a lead plaintiff for the suit.

Early reaction to the suit is skeptical. Virtualization blogger Michael Keen calls it a “complete waste of judicial time and money,” because “anyone with a pulse” should have known these things without Greene or Peek disclosing them.

“I am so sick of this country’s penchant for suing someone else for their stupidity or lack of common sense,” he writes. “No wonder they can’t find a lead plaintiff for this ridiculous lawsuit.”

And Alessandro Perilli of virtualization.info wonders about the timing of the suit: “It’s a funny coincidence that this lawsuit is being arranged right now that Diane Greene is rumored to be back in the virtualization industry with a new startup.”

A Google search for Holzer Holzer & Fistel returns pages and pages of announcements about class-action lawsuits the firm has filed and investigations it has launched. Just two weeks ago, the firm said it was looking into possible securities violations by Sprint Nextel.

Regardless of the validity of this lawsuit, VMware and its partners still face a bumpy road this year. There will be increased competition from Microsoft, now that Hyper-V has live migration. And although VMware advocates say virtualization is recession-resistant, there’s still doubt that customers will want to spend on virtualization this year — even if it saves them money later on.

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