Microsoft's Virtual (Real) Challenge?

In a series of annoucements that could pressure VMWare stock, MS made it clear that it's going to go after virtualization along multiple channels, and with great determination. Their intent to purchase Calista, a desktop virtualization presentation product, falls in line with what they hope to do with the technology, and where they want to apply it.

One must remember that desktop virtualization is still new and hasn't really become popular yet, but should take off like a rocket once corporate types figure out it's cheaper, easier, more secure, and more reliable to push out a preformed virtual image to employees' machines than any other solution.

Now that the Server 2008 will have Hyper-V built-in - and with the same OS layer that they sell so much of, the teaming up with Citrix (which purchased XenSource) will further help consolidate their position as being highly committed to the VM platform. VMWare must now fight back with new relationships/partners and technologies that will improve the speed, response, security, and performance of their products in general. Although they have a commanding lead in the market and are seen as the leaders, MS thrives on starting late and catching up then overtaking. So, despite any delay or kludgy/buggy interfaces that one may encounter in MS' first offering, you simply can't write them off. They have the money, the resources, and the doggedness to go after *anything* - however dumb a move it *may* seem to outsiders.

To be sure, the OS is still their main source of revenue; however, they'll take anything they can get in the fresh, still-quite-untested market of VMs. No question it's a new source of revenue (and customers), and it's also one that's bound to grow very fast, and by large amounts. The 'green' message behind VMs helps a lot, plus space and time savings. The Citrix partnership could hold back those companies that want to move from MS to Linux and keep them safely ensconced in the MS fold.

Although analysts seem to be confident about VMWare's current strategy and product direction, they'd do well to keep looking over their shoulders.

All in all, it's a VERY positive announcement from MS, but let's hope they don't come up with another Zune (if they did, then with a little stretching one could call VMWare the Apple of VMs).