VMware Sues Former Executive For Joining Nutanix; Street Sees 23% Upside

VMware has sued its former COO Rajiv Ramaswami for breaching contractual obligations while being interviewed to be the CEO of rival Nutanix. Ramaswami left VMware and joined Nutanix on Dec. 9 as the company’s CEO.

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VMware (VMW) said in a statement that “Rajiv Ramaswami failed to honor his fiduciary and contractual obligations to VMware. For at least two months before resigning from the company, at the same time he was working with senior leadership to shape VMware’s key strategic vision and direction, Mr. Ramaswami also was secretly meeting with at least the CEO, CFO, and apparently the entire Board of Directors of Nutanix, Inc. to become Nutanix’s Chief Executive Officer. He joined Nutanix as its CEO only two days after leaving VMware.”

The Palo Alto-based software maker further stated that “Mr. Ramaswami demonstrated poor judgement and had a clear and extended period of conflict of interest. But he did not notify VMware, and thus deprived the company of the ability to do so by concealing his Nutanix-related activities.” (See VMW stock analysis on TipRanks).

VMware said that in the past it had contacted Ramaswami and Nutanix to resolve the matter but both “refused to engage with VMware in a satisfactory manner.”

Last month, the cloud computing and virtualization software and services provider had reported better-than-expected 3Q results. However, despite the stronger-than-anticipated quarterly performance, Barclays analyst Raimo Lenschow lowered the firm’s price target to $180 (29.1% upside potential) from $187 and reiterated a Buy rating.

Lenschow expects VMware stock to trade range-bound in the near-term due to the lack of visibility over the recovery for the transactional, on-premise business.

Consensus among analysts is a Moderate Buy based on 11 Buys and 4 Holds. The average price target of $172 suggests upside potential of about 23.4% to current levels. VMW stock has lost 8.2% year-to-date.