VMware says competition is not eroding pricing
VMware Inc. Chief Executive Diane Greene said today that the company has been able to keep the price of its virtualization software from eroding, even as new competitors emerged in recent months.
Until last year, VMware had a near monopoly in the virtualization software market as its scientists were the first to commercialize the technology for server computers; VMware's products boost the efficiency of server computers by allowing one machine to perform the work of several.
California-based VMware is majority owned by EMC Corp., the Hopkinton data-storage giant.
"Certainly (competitors) come up when we are negotiating a deal," Greene said at a Lehman Brothers investor conference. "It is the natural thing for a purchasing agent to do. But at the end of the day they know they are deploying VMware."
Typically server computers run one operating system which might utilize 10 or 15 percent of its power. A server using VMware software can simultaneously run five to 10 operating systems. Each of these systems becomes a virtual machine working as an independent server.
The technique was adopted from one developed decades ago to run mainframe computers. VMware says that companies save hundreds of dollars per year in electricity costs with each server running its virtualization software.
VMware's competitors, including Citrix Systems Inc , Oracle Corp, Sun Microsystems Inc and Microsoft Corp, have either recently introduced virtualization software or have products in their pipeline.
VMware shares more than quadrupled following their August IPO at $29 per share. They hit a record $125.25 on Oct. 31, on expectations the software maker's technology is one or two years ahead of its closest competitor.
But the stock has declined more than 20 percent since then as analysts took a closer look at software from competitors, particularly after Oracle unexpectedly introduced on Nov. 12 a rival product that it had secretly developed.
Shares in VMware rose $1.28, or 1.35 percent, to $96.36 at midday on the New York Stock Exchange. It has a market value of about $37 billion, making it the world's fourth-largest publicly traded software maker.
Greene told investors at the Lehman conference that VMware's software has far more advanced capabilities than that of rival virtualization software companies, and allows businesses to do more than simply get more power out of server computers.
VMware sells a suite of data center management software that is designed to boost the efficiency of entire data centers, streamlining operations and allowing companies to quickly recover from disasters.
Greene said none of her competitors has such a product.
"We have been able to maintain our price points because there is all this amazing functionality that is of very high value," she said. "We are not seeing a price point issue." (Reuters)