There is already some pilfering of VMware customers by Microsoft and there's more to come. Many small and midsized companies will discover they can manage quite well with the level of virtualization management that Microsoft offers. And large companies already using VMware will find they can run a department or a remote branch quite adequately with Windows Server 2012 and Hyper-V. But I don't think that's the whole story.

VMware still occupies the heart of the virtualization space at many large, virtualized data centers. It's trying to follow up success with its vSphere 5 suite with the next step, the software-defined data center as captured in its vCloud Suite, which provides for user self-provisioning of virtual machines and flexible storage and networking that moves around when the virtual machine does.

COO and president Carl Eschenbach noted during the earnings call that the fourth quarter of 2012 was the first in which vCloud Suite had been available for the full quarter. Bookings during the quarter exceeded expectations, and most of its orders were in the form of enterprise license agreements. "The vCloud Suite comes in three flavors: standard, advanced and enterprise. Our enterprise version, with a list price of $11,495 per CPU, had more bookings in Q4 than either the standard or advanced versions. The latter are the lower-priced versions, of course.

This single point speaks clearly to where VMware's continued strength lies. It's led the conversion of data center servers from one application per server, utilized at 7-15%, to multiple applications per server, with the server hardware utilized closer to 50%. And there's little doubt there's still a ways to go. The fact is, both VMware's and Microsoft's virtualization software continues to become more capable, and that means fewer licenses must be sold to manage more and more virtual machines.

VMware is now leading how virtualization changes the management of the data center into a more cloud-like environment of flexible, pooled resources where end users are able to self-provision, then IT is able to tell them how much their department will be billed for the resource at the end of each month. The software-defined data center is driven by automated processes run by IT-set policies. With such an approach, it may be possible to come closer to utilizing 80-90% of the hardware resources instead of living with them as perpetually over-provisioned.

That is, in VMware's view, virtualization is not just about subdividing servers. It's the future command post of a highly automated, policy-driven data center. Within vCloud Suite is vCenter Operations, a component that rolls up configuration management, performance management and capacity management. To get to 85%-95% utilization rates, capacity of all hardware resources will need to be monitored and carefully honed. In all likelihood, it will require standby copies of virtual machines, waiting to be fired up in the public cloud as an extension of the data center during those periods when on-premises capacity isn't sufficient. VMware has such a development in mind as it assembles the components of vCloud Suite.

Whether VMware can really sell this vision of the future remains to be seen. Many IT shops could stop well short of it, rely more heavily on Microsoft, and still be well-managed, trim and efficient operations. Or they could reorganize around open source software -- Eucalyuptus, OpenStack or CloudStack -- and expect it to move in the same direction of integrated operations as vCloud Director. Open source, while still behind, has shown a rapid pace of innovation on the cloud side of future operations.

Neither VMware customers, Microsoft customers nor open source users are sure where all the ferment in virtualization, data center re-organization and cloud computing will lead. Will one brand run off with the whole show? The possibility that it might not be VMware seemed to occur to a lot of investors at the same time after the fourth-quarter earnings report.

But between the lines of the fourth-quarter report, VMware is not doing that badly where it most wants to next establish itself. If it is selling vCloud enterprise license agreements at a better pace than the lesser agreements, that means to me it's getting buy-in for its software-defined data center concept. And by cutting back in applications, it's saying it'll put more wood behind the arrow of its primary business. So far, VMware has been about executing in incremental steps. Competitors have striven to keep up, but each time they announce they've done another thing VMware can do, they've looked up and there was VMware still several steps ahead. But 2013 may be the year when that is less true than before, and as the VMware bears have already indicated, its stock will suffer.

But VMware bulls still have an appetite for the fight. At the end of 2013, they may be the ones to say the market for virtualization products is still expanding and VMware revenues along with it. The data center of the future is still evolving, and VMware's product line along with it; the operational efficiencies and know-how of cloud computing still accumulating, and VMware's cloud system still capturing and implementing it day to day.