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VMware responds to Microsoft virtualization pressure with shake-up

Microsoft's Hyper-V is here and VMware will face a bruising fight to keep its dominant position in the virtualization market. The EMC division's board of directors reacted by dumping the company's longtime chief.

With last month's release of Hyper-V and a recent System Center beta that lets IT managers cross manage a variety of virtualized servers, Microsoft has made it known that it is dead serious about taking on rival VMware Inc.

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VMware's board of directors today reacted by replacing VMware's president and CEO Diane Greene with a former Microsoft top executive Paul Maritz, the current president of EMC's cloud division. Greene was one of VMware's founders. EMC acquired VMware in 2004, but the company runs as an independent unit.

Experts said Greene had done a fantastic job getting VMware to where it is one of the hottest companies around. But some were unsure if she had the chops to take on a hard-charging Microsoft.

"I've seen a lot of companies where the technical founder couldn't get past the hump," said Andi Mann, senior analyst at Enterprise Management Associates, a Boulder, Colo.-based consulting firm. He added that VMware needs to integrate more with its mother ship, EMC.

VMware will get enormous price pressure from Microsoft, which can integrate much of its virtualization technology in existing products. So when virtualization is your whole business, it's scary, said David Payne, CTO at Xcedex LLC, a Plymouth, Minn., integrator that specializes in virtualization technology. "VMware's biggest competitor will be Microsoft now."

Payne said his only criticism of VMware of late has been that it has made a lot of recent acquisitions with no strong attempt to integrate the new technologies. One such acquisition was Thinstall, a privately held company that specializes in application virtualization, made last January.

"From a marketing perspective it looks good, but under the covers it's fragmented," Payne said.

VMware said this week that it is expecting lower revenues for 2008 than it had previously predicted. Microsoft's anticipated entry into the market might have slowed sales. But another reason could be that some IT shops are doing less with virtualization than they previously expected.

"There are other players in the game and that has probably led to VMware's decline," said Rob Gallant, lead systems administrator with Axcelis Technologies Inc., a Beverly, Mass.-based company that designs technology for the semiconductor industry.

"Also, a lot of people probably got on board with virtualization but then backed off," he added.

Axcelis uses VMware for some server consolidation, but also for development or testing. "We thought we could do more," he said. "Sometimes performance is an issue. And some developers use it as a crutch. When something goes wrong, they blame VM[ware]. But we've had some servers freed up and rather than let them sit on the shelf we use them [instead of using VMware]."

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