Virtualization vendor VMware disclosed Tuesday that its founder and CEO Diane Greene has resigned and been replaced by former Microsoft executive Paul Maritz.

The company also cut its 2008 revenue growth forecast, saying it will be “modestly below” its previous forecast of 50 percent growth over 2007. Wall Street reacted quickly, sending company shares tumbling 26 percent to less than $29 per share.

VMware’s initial public offering last year was the most hyped Silicon Valley IPO since Google’s, a measure of the company’s success and the growing popularity of virtualization. Through virtualization, software creates a virtual server, operating system or storage device, cutting down on resources and costs of deploying technology.

Maritz worked at Microsoft from 1986 to 2000, and in 2003 founded Pi Corp., a software company focused on building cloud-based services for personal information management. VMware parent EMC Corp. acquired Pi in February, at which point Maritz became president of EMC’s Cloud division.

Greene founded VMware in 1998 after holding positions at various high-tech companies, including Silicon Graphics, Sybase and Tandem. VMware gave no information about her future plans.

Her departure comes as VMware, the de facto leader in virtualization technology, faces a new challenge from Microsoft, which last week released Hyper-v, a free virtualization solution the vendor is distributing with several editions of its Windows 2008 Server. Microsoft, which is holding its annual partner conference in Houston this week, is pushing to make Hyper-v the standard in the enterprise.

Earlier this month, VMware completed the acquisition of B-hive Networks, a privately-held application performance management software company with headquarters in San Mateo, California, and principal R&D facilities in Herzliya, Israel. Financial terms of the deal were not disclosed.