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Microsoft, VMware going head to head

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Reuters / December 14, 2007

Microsoft Corp. said yesterday that it has begun public trials of new virtualization software that will compete head-on with programs from VMware Inc., saying the tests are starting ahead of schedule.

Shares in VMware, the world's fourth-largest publicly traded software maker, fell as much as 7 percent, and Microsoft shares rose as much as 2.8 percent after Microsoft's disclosure that it has released the trial software, known as Hyper-V.

Microsoft said it previously told customers the first public release of the test version of Hyper-V would be in the first quarter of next year.

A Global Equities Research analyst, Trip Chowdhry, said the release of the trial versions of the Microsoft virtualization programs, which come on the heels of Oracle Corp.'s unexpected entry last month into the market for virtualization software, is bad news for VMware.

Chowdhry said engineers at Microsoft have told him Microsoft's virtualization programs are three times as efficient as those from VMware, which is based in Palo Alto, Calif.

Oracle has publicly made a similar claim.

Officials with VMware, which went public in August in the hottest technology initial public offering in recent years, could not immediately be reached for comment.

Shares of Hopkinton-based EMC Corp., which owns 86 percent in VMware, fell 2.54 percent to $19.18.

VMware closed at $96 yesterday, down 3.26 percent. Microsoft closed at $35.22, up 2.18 percent.

Typically, server computers run one operating system that might utilize 10 or 15 percent of its power. A server using VMware software can simultaneously run five to 10 or more operating systems. Each of these systems becomes a virtual machine working as an independent server.

VMware says that companies can save about $600 per year and 7,000 kilowatt hours in electricity for every software application put onto a virtual machine.

Each server removed through virtualization saves 12.5 tons of carbon dioxide emissions, which is equivalent to taking 1.5 cars off the road, according to VMware.

VMware's shares hit a record $125.25 on Oct. 31, on expectations that the software maker's technology was one or two years ahead of its closest competitors'.

Microsoft plans to incorporate virtualization software in the first major upgrade to its business operating system for server computers, Windows Server 2008, to be released next year. But the world's largest software maker has reported multiple delays in completing the virtualization component.

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