SiliconBeat

When asked by an analyst “Do you have a good sense for where morale is today?” among employees at VMware, its new chief executive, Paul Maritz, said the proposed option exchange “went a long way to addressing concern there.”

The question came up as part of the regular conference call the company conducted after releasing earnings Tuesday (which the filing incorrectly said took place “Thursday, July 22” — seeing other folks’ boo-boos in print makes us feel a bit less badly about our own), and on Wednesday VMware posted excerpts from the call with the SEC late Wednesday afternoon that specifically addressed the proposed option exchange program the company announced last week, and for which it must first get approval from shareholders.

VMware, which conducted a boffo initial public offering last August that got us all excited, saw its stock price rise from an initial price of $29 to as high as $125 by Halloween. However, the stock has been knocked down since then, closing at $36.80 Wednesday.

The exchange program would be geared for those unlucky employees who either got initial employment grants and/or additional option grants since the August IPO, when its shares were trading much higher than they are now.

So how much morale are we talking about? Not as much as you might think. Of the 41.1 million option shares outstanding as of Dec. 31 that the company expects to eventually vest, 39.1 million, or 95 percent, have a weighted average exercise price of $23.08 or less, according to the company’s annual financial filing (page 80) with the SEC.

Nevertheless, for those employees holding some of the 1.9 million options with an average exercise price of $109.50, we’re sure their morale could get a boost from the measure. And when might the boosting begin?

Mark Peek—VMware, Inc.—CFO

…With respect to timing on the option exchange, we have regulatory filings that we need to make. The exchange has to be open for 20 business days, but first we have to have shareholder approval. And so we’re moving along quickly. Our expectation is that we will get that done in the near-term, but it’s a little bit too early to tell exactly when it will occur…

Tom Curlin—RBC Capital Markets—Analyst

So, during fiscal Q3?

Mark Peek—VMware, Inc.—CFO

Yes, we’re certainly hopeful that it can occur during the third quarter, but certainly during the fiscal year.