Hyper-V: VMware Vs. Microsoft, OR VMware & Microsoft? (MSFT, VMW, CTXS)

Microsoft Corp. (NASDAQ: MSFT) might be getting more attention over its virtualization launch of Hyper-V if it wasn’t for the market.  This is being interpreted as the equivalent of "Public Enemy #1" to VMware (NYSE: VMW).  VMware shares are down 4% and slightly under $60.00 on the same day. 

Industry executives are actually mixed on this as fact or perception.  One thing will be an issue and that is the price.  This is free for Microsoft’s Windows Server 2008 downloads.  Will it always be free, or will there be add-on packages or pay-upgrades?  Those are questions still being asked.

Microsoft’s Windows Server 2008 Hyper-V is meant to extend the virtualization capabilities of Microsoft’s Windows Server 2008.  Hyper-V is available free with copies of Windows Server 2008 and the formal date for the download launch is July 8. 

There are estimates showing that VMware has up to 90% of the virtualization space currently locked up, although that figure varies.  The major questions will really boil down to how much of the virtualization space that VMware keeps.  The high-end of the spectrum seems almost a certainty as of today, but the beauty of computing and technology is that the next generational change is a lab or dorm room away. 

The numbers that are still thrown around for an industry estimate (long-term) are the IDC estimates that put the virtualization market around $11.7 billion by 2011, but that is a mere estimate taking many static issues and moving parts into consideration.

Hyper-V has been available in its beta launch, and Microsoft has indicated that roughly 1.5 million versions have been used.

Server and high-end PC makers are on board, but the reality is that both Hyper-V and VMware have been adopted and for now the hardware makers seem more agnostic.

It seems that Hyper-V may see more penetration in small and medium-size customers with its free launch on Windows Server 2008.  Will VMware keep the high-end of the virtualization market?  Will smaller players like Citrix Systems (NASDAQ: CTXS) via its XenServer or will private VirtualIron be able to gather more ground?

The answer is likely to be that there is room for everyone here.  As long as systems don’t become too closed and as long as the interoperability of systems works then that will hold true. 

If confederacies turn into forced exclusive alliances, then all bets are off.  Under that scenario we are just back to 1990.  Microsoft’s virtualization product is essentially here.  VMware’s virtualization has a serious head start.

Jon C. Ogg
June 26, 2008