EMC: Is EMC Cashing in On VMWare Just in Time?
The bulls have been out in force on EMC Corp. (EMC - Annual Report) due to the strong contribution VMWare has been making to earnings, and to the decision to sell a portion of VMWare in an IPO.
Virtualization is hot because it allows companies to do more with less, and those types of investments are about the only thing companies will loosen up the purse strings for. But with EMC now getting the opportunity to give up a tiny slice of VMWare while recouping most if not all of its initial investment, I was particularly sensitive to an article at Infomationweek about potential new competitive threats.
XenSource’s XenEnterprise Is A Virtualization Bargain (Informationweek):
Virtualization will inevitably shrink the bite hardware takes out of our capital budgets. But VMware has somewhat dampened IT’s enthusiasm by charging $3,000 per socket for its enterprise-class VMware ESX. Doesn’t, say, $750 per perpetual dual-socket license sound a lot better?At that price, XenSource’s XenEnterprise 3.2 is an easy-to-install bargain that takes advantage of the open source Xen 3.04 hypervisor. For many organizations itching to get going with virtualization, XenEnterprise will serve nicely thanks to its solid performance and general ease of use. The current version has some drawbacks: For one, it doesn’t yet support 64-bit Windows, but XenEnterprise 4.0 will and it’s heading into beta now, with an expected mid-August production date.
Adding to market pressure, Microsoft (MSFT - Annual Report), another latecomer to the virtual machine party, will include a sufficiently robust virtualization offering as part of its new server operating system. In what has to be good news for XenSource, the big guns in Redmond have preannounced formal support and integration for Xen-based VMs as part of the next server build, to optimize Windows Server 2008 to run on Xen and to let XenVMs run on Server 2008. XenSource is partnering with Microsoft to optimize Win/Xen and Xen/Win performance.
Ain’t competition grand?
Grand indeed, for consumers. But the potential buyers in the IPO may want to question whether it will be equally grand for them.
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VMware does have its share of competitors out there. But it’s not XenSource. People have been beating the drum for XenSource and the related Xen open source project for a really long time. They’ve changed their model and product/ service around a million times.
I have my on *other* open source projects: Virtual Box, QEMU, and KVM. Xen(Source) has it the industry’s attention for too long and just never delivered the ease of ESX’s management tools.
I think VMware has a guaranteed additional two years of dominance before they need to seriously respond to these OSS competitors. Their problem will not be Microsoft or XenSource.
Good points, and I don’t profess to be as up on the competitive situation as industry insiders. However, many interested investors are not industry insiders. I think this kind of information is useful for investors to have, to decide for themselves how important it is.
Also, a reader pointed out that while Xen may charge less per socket it doesn’t mean you are paying less. Performance is a key to virtualization, and VMware outperforms every hypervisor on the market. If a company can get 12-15 Virtual Machines with VMWare, it may only get 7-8 with competitors products. Take in the extra hardware, cabling, power, etc…you get the point. You must compare apples to apples.
sure… btw the way, i know nothing about stocks or business. i’ll admit that. but i am a tech geek who works with these things.
At the moment, VMware does not allow people to publish direct benchmarks comparing ESX to XenSource stuff (something they’ve long been criticized for, and to be fair, say they will change). Anyway, we don’t truly know apples-to-apples, though those of us who have both products in-house, know.
The challenging thing about virtualization is that there really is no apples-to-apples because each of the main three dominant tools don’t really fit the same niche. Xen is best for all-Linux. VMware’s ESX can host both Windows and Linux without anybody getting “punished for being different.”
Microsoft sucks at hosting Linux at all.
At the moment, VMware is simply alone an untested.
As a geek, I really want some competition in there. But for now and the foresable future (i’ve seen beta’s of future MSoft and Xen stuff), I see myself using VMware for two years out, though I look forward to other open source tools (KVM and QEMU)’s inclusion in the Linux kernely, really creating some new options.
My prediction: eventually VMware will be open source (though not free, and still a profitable business, just more like Redhat/ MySQL/ JBOSS in terms of business model).
We investors can be an inscrutable lot sometimes. And the best product doesn’t always win, so it’s good to know how it may hit a speed bump. But the more conversations we have the more likely we will be able to sort everything out.
Thanks for joining the conversation.
>My prediction: eventually VMware will be open source (though >not free, and still a profitable business, just more like >Redhat/ MySQL/ JBOSS in terms of business model).
No doubt…:) The thing is that when I say they have no competition I don’t man functionally I mean market wise. I agree with you on the KVM (btw, are you that D V guy on CMG?).
I also a think VMware will dominate the x86 market for at least the next two years and also increase market share in the enterprise SUN and IBM market w/their OEM/Hypervisor plans. Along the way they will loosen up just enough to play nice with OSS to give them about another 3-5 years. I fact they will be so far ahead they will buy their nearest competition (with the help of EMC).
Just my thoughts!
John Willis
johnmwillis.com