Microsoft starts selling rival to VMware programs

Tag : Software Programs

By Jim Finkle
BOSTON (Reuters) - Microsoft Corp <MSFT.O> said on Thursdayit has started selling its new server virtualization software aboutsix weeks ahead of schedule, putting pressure on market leaderVMware Inc <VMW.N>.
Server virtualization software allows one machine to perform thework of multiple servers, letting companies save money onequipment, electricity, maintenance and other costs.
Microsoft says it charges $28 per server for its software, dubbedHyper-V. Yankee Group analyst Laura DiDio said that a comparableVMware product costs $7,000 to $14,000, depending on how manyprocessors the server has, though she notes that VMware's softwarehas more advanced functionality in some key areas.
"The price difference is jaw-dropping," said Jefferies & Co.analyst Katherine Egbert. "I think that will cause a lot of peopleto at least consider Hyper-V."
Customers of Microsoft, the world's biggest software maker, canstart downloading the product from its website on Thursday, thecompany said. Microsoft had previously said it would make theproduct available in August.
VMware shares fell 4.25 percent to $59.58 in afternoon trading onthe Nasdaq. Microsoft shares were down 1.31 percent at $27.98.
Officials for VMware were not immediately available for comment.
Analysts said that customers who decide to stick with VMware willhave increased bargaining power due to Microsoft's lower price.
"I always tell companies to press very hard on pricing whennegotiating with all software companies," DiDio said. "It's abuyer's market."
Nucleus Research analyst Rebecca Wettemann said that she thinksMicrosoft would be a credible competitor to VMware.
"Microsoft has to be taken very seriously because of its size.Microsoft is going to make inroads," she said.
VMware controls the vast majority of the server virtualizationsoftware market. The company is 86 percent-owned by EMC Corp<EMC.N>.
Other companies that compete with VMware include Citrix SystemsInc. <CTXS.O>, Oracle Corp <ORCL.O>, and two privatelyheld companies - Virtual Iron and Parallels.
(Reporting by Jim Finkle; Editing by Derek Caney and DaveZimmerman)