VMware's CEO switch targeted at Microsoft, analysts say

New VMware CEO Paul Maritz will battle old friends at Microsoft

Partnering with Microsoft might be the best option for VMware, which has previously taken an "us against everybody approach," according to Bittman.

"I think VMware could be a bit more cooperative with Microsoft and vice versa," he says.

VMware still has a significant advantage over Microsoft in terms of its hypervisor. VMware gives users the ability to move an application running on a virtual server from one physical device to another instantaneously, a capability known as live migration. Another major VMware feature is "hot add," the ability to add memory to a virtual server while it's running.

One potential problem with Hyper-V is that it requires a parent operating system, and the hypervisor must call the parent operating system for every I/O call, according to Bittman.

"We're concerned about the architecture of Hyper-V," Bittman says. The parent operating system is "a single point of failure. The idea that one copy of Windows can bring down all your virtual machines is scary."

Hyper-V has a huge advantage over VMware on price: it's available as a free download to Windows Server 2008 users. Most other virtualization vendors, including Citrix, keep prices low by relying on the open source Xen hypervisor.

VMware's list prices range from US$495 for VMware ESXi to $5,750 for VMware Infrastructure Enterprise.

The US$495 price point is a big improvement over three years ago, when the lowest price was US$3,750 for every two processors, Bittman says. But he urges VMware to give the hypervisor away for free.

"I absolutely think they should give that away," he says. "In my view, the hypervisor becomes table stakes and the differentiation is all management tools."

VMware does offer a free, stripped-down version of its hypervisor, the VMware Server, but Bittman says it's difficult to scale up from the VMware Server to the rest of the company's products.

In the press release announcing that Greene was being replaced with Maritz, VMware said it expects 2008 revenues to be "modestly" lower than the previous expected growth of 50 per cent over 2007.

Less than 50 per cent growth in a tough economy would be cause for celebration for many companies. But investors have hammered VMware on Wall Street for not meeting lofty expectations, with stock prices dropping from US$83 in January to $40 this month.

The stock turmoil and CEO switch shouldn't affect large enterprise customers, Bittman says. Small and medium-sized businesses, though, might see VMware making a better effort to woo them, he adds.

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Jon Brodkin

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