tl;dr

Valleywag is reporting that following the abrupt dismissal of former CEO Diane Greene by EMC, VMWare’s parent firm, they’ve lost another three board members — her husband Mendel Rosenblum quit (they offered him the job his wife was fired from! Just how clueless can you be?), product development VP Paul Chan, and research and development VP Richard Sarwal (more info from the NYT). This is the management team who did one of the smartest strategic moves I’ve seen in high tech in years — in 2006, just as the competition’s virtualisation offerings were catching up with VMWare’s bread-and-butter product, ESX Server, they made ESX Server free and released an impressively thorough (and expensive) tools management suite. At one stroke, they rendered their competitor’s new offerings moot (by making virtualisation software a commodity) and moved ahead of them (by changing the game to be infrastructure management instead, where VMWare has a commanding position).

Back to the present day, where Microsoft is pushing its all-new Hyper-V virtualisation platform with a big marketing campaign. I’ve not used Hyper-V yet, but I’ve heard very positive reports about it, and certainly on paper it goes a long way to closing the gaps between the current Microsoft virtualisation platform, the aging Virtual Server 2005 R2, and VMWare’s much more sophisticated offerings. I took part in a big evaluation of virtualisation technologies during 2007 at my former employer, and despite being a Microsoft shop, we didn’t even consider Virtual Server as the management tools where just so poor compared to the VMWare Virtual Infrastructure set. Hyper-V isn’t perfect but it seems much improved.

What does this add up to? Well, the share price is tanking, for one; it hovered around $65 throughout May and June 2008 but since the 9th July announcement of Diane Greene’s resignation it has plummeted, spending July and August in the mid-30s. It closed yesterday at $31.51, a 52-week low point. That’s a quarter of the 52-week high of $125.25. That’s a biiiig drop.

So, are they totally screwed? I don’t think so, actually. Consider this vomit-worthy white paper from some sort of Microsoft shill analysis firm. In amongst the usual PR smoke-and-mirrors that I could quote extensively but will spare you from, even this biased document is forced to admit that VMWare’s products still have the edge.

“Product depth is the single biggest differentiator when comparing VMware and Microsoft x86 virtualization. It can be argued that VMware has several distinct advantages when it comes to managing virtual machines — most notably in the area of virtual machine mobility (the ability to move live virtual machines with active sessions underway — also known as “live migration”). Further, it can be argued that VMware has done a good job in packaging — allowing it to sell its add-on management and infrastructure software as integrated software suites.”

Now, the white paper naturally glosses over this somewhat but in a production environment, these sorts of management tools that can move VMs around between host platforms on the fly are a big part of the draw to server virtualisation in the first place. Microsoft not having anything to compete with that is a definite knock against Hyper-V. So as it stands, VMWare still have some compelling product in the market place; but, in Wall Street’s opinion and my own, they’d better start pulling it together before Microsoft eat their lunch.

PS. Actually, I will quote some of the pro-Microsoft stuff from that report.

“Microsoft builds Windows, hence Microsoft controls Windows. Hyper-V is built in conjunction with Windows and can influence Windows OS developmental directions. … Microsoft’s plans to leverage this installed base by: Making virtualization available to everybody as a very low cost, integrated option.”

So, to paraphrase, Microsoft have a near-monopoly in the OS market and will therefore attain pre-eminence i nthe virtualisation market by exploiting the OS market. Uhh, didn’t we already go through this with the US Deparment of Justice and the European Competition Commission? Didn’t they both decide that was an illegal use of monopoly powers? I think they did!

Professional