EMC's VMware faces fight for market control
Ware to now?
Currently, shareholders of VMware Inc. are sitting pretty.
The stock of the company - 86 percent of which is owned by Hopkinton-based EMC Corp. - is trading north of $60 per share. That's up from the $29 a share its stock was trading at the time of its IPO last month.
And with a market valuation above $20 billion, an 85 percent overall market share and a well-respected product line, the investment will prove a wise one.
For now.
Bull's eye
While generally recognized as the current market leader, emerging competition in the burgeoning virtualization market is threatening to loosen VMware's chokehold on the industry.
At first glance, the future for VMware looks bright. John Humphreys, an analyst at IT and communications research firm IDC in Framingham, said the virtualization market could triple in the next five years, to more than $3 billion.
Virtualization software enables IT managers to run multiple operating systems on a single server platform, thereby enabling users to do more with existing hardware.
Companies that can do more with less can recognize huge gains, Humphreys said, hence VMware's stunning early success. But as the market grows, VMware may become a victim of its own success, struggling to advance under the weight of the giant target on its back.
"It's only now that we're seeing the competition catch up," Humphreys said. "But once that demand curve flattens, that's when the tide will turn."
If VMware's product lineup is, to date, superior to those offered by competitors like Microsoft (and by most accounts, it is) the Palo Alto, Calif.-based company cannot hope to compete with its Seattle-based neighbor in terms of market saturation, value, reputation and integration, analysts agreed.
Historically, once Microsoft enters a market, it tends to dominate it, said Charles Babcock, editor-at-large for Information Week, an IT trade publication. Microsoft's ability to package its own proprietary virtualization software with its next generation Windows server operating system, regardless if it has all the bells and whistles of VMware's product, will certainly be a factor in the market, Babcock said.
"Something available for free from a market-trusted vendor has that effect of tipping the scales," said Babcock.
Mark Bowker, an analyst at Milford-based IT and technology analysis firm Enterprise Strategy Group, said that even now, without a fully developed virtualization software product on the market, between 20 and 25 percent of his customers are still using Microsoft's basic software, or are waiting for a full product launch, expected toward the middle or end of next year.
Not lying down
In addition to competition from Microsoft, VMware also stands to lose ground as free, open-source virtualization software available for downloading gains more popularity, Babcock said.
While lacking the features of VMware's, or even Microsoft's, full product suites, the free software does enable smaller companies to at least get their foot in the virtualization door.
In this arena, XenSource, recently acquired by Citrix Corp., has shown initiative, Babcock said, although VMware has countered with its own free software.
But VMware is not taking the increased competition lightly. In addition to the company's continuous efforts at offering more and better products, they have also recently started an academic partnership program, aimed at exposing tomorrow's users of the software to it, said Julia Austin, senior director of research and development, who works at the company's offices in Cambridge.
Raghu Raghuram, vice president of products and solutions for the company, also stressed that because the company has been at it for so long and has built a trusting client base, it is easier for them to respond to customer requests and keep ahead of competitors.
WBJ Web Partners
Most Recent
Most Recent
0 Comments