Microsoft narrows gap with VMware

Hyper-V makes good showing in first months of availability, IDC says

VMware is holding onto its market-share lead in the x86 virtualization market but Microsoft is making a strong push with Hyper-V, IDC statistics show.

In the second quarter of 2008, VMware's virtualization revenue market share was 78 percent, down from 86 percent in the previous year's second quarter and identical to its share in this year's first quarter. Meanwhile, VMware's share of new shipments was 44 percent in the second quarter, down from 51 percent the previous year but up from 42 percent in the first quarter of 2008.

Microsoft captured 23 percent of new shipments with Hyper-V and Virtual Server 2005, up from 20 percent last year and from 18 percent in this year's first quarter. But Microsoft's revenue share is a paltry 1.1 percent of the x86 market, says IDC analyst Brett Waldman, who notes that the second quarter was the first in which Microsoft shipped a paid product.

Parallels' Virtuozzo product secured 16% of the second-quarter revenue, good for second place behind VMware, Waldman said.

VMware, despite losing some of its industry-leading market share, enjoyed year-over-year revenue growth of 27 percent. That's indicative of the healthy gains made throughout the virtualization market. Worldwide, second-quarter virtualization license shipments rose 53 percent over the previous year, IDC says in a quarterly virtualization market share update.

The rate of growth is slowing, however. In the first quarter IDC observed 72 percent year-over-year growth. Second-quarter revenue growth was 15 percent, compared to 32 percent in the first quarter.

"The modest decline in growth rates indicates that the market is showing early signs of maturation," Waldman said in a press release. "Based on our conversations with end users, IDC believes that the high-volume consolidation opportunities -- the low-hanging fruit in the x86 server virtualization market -- is starting to dry up. This is, in turn, resulting in smaller deals overall." To keep growing, hypervisor vendors will have to target new customer segments, such as midsize companies, IDC says.

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