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VMware Wins At Show Me The Money

While Microsoft plays catch up with its upcoming System Center 2012, VMware craftily focuses on management tools and posts 2011 revenue up 32% over 2012.

VMware finished 2011 with revenue up 32% and net income double the previous year's. While it faces increased competition for its command of the lion's share of virtualization software budgets, so far its competitors haven't dented its growth curve.

VMware's results were reported less than a week after Microsoft made it clear it will contest VMware's lead in virtualization software with its soon-to-be-released System Center 2012 suite. Unlike VMware, Microsoft's systems management approach will be a cross hypervisor one, able to manage its own Hyper-V, Citrix Systems XenServer, and VMware's ESX Server.

"VMware is now a first-class citizen under System Center," boasted Brad Anderson, Microsoft corporate VP, in an interview shortly before System Center 2012 was announced Jan. 17.

[ Want to learn more about what's in System Center 2012 that might make it more competitive? See Microsoft System Center 2012's Private Cloud Power, Explained. ].

Both VMware, with its vCenter Operations Suite, and Microsoft view the management console of the virtualized data center as the new command post for the future. But Microsoft's System Center 2012 code is still at the release candidate stage, with features to be finished up. It's due out by midyear--but it had better hurry. VMware's 2011 results suggest its customers are buying more deeply into the VMware product line and counting on it to continue supplying new data center automation features. It launched vCenter Operations, which does virtual machine configuration and performance management, along with capacity management, in March last year.

Last July, VMware attempted to impose--and was forced to back off--a 48-GB virtual memory limit built into the pricing scheme for its core environment, vSphere 5 Enterprise Edition. After customer protest, it doubled that limit to 96-GB per host CPU. Microsoft played off the incident Jan. 17, saying the ability to exploit increasing CPU power was "a customer right" and not something that should be limited by the virtualization vendor. And it priced the two-operating system environment, System Center Standard Edition, good for a two-CPU server, at $1,300.

VMware's price list remains largely intact and illustrates how it's aiming its product line at the heavily virtualized and willing-to-pay-for-it market. The environment-enabling vSphere Enterprise is priced at $2,875, with Enterprise Plus at $3,495, plus annual support. The basic management software, vCenter Standard, is $4,995, plus support. VCenter Operations suite is priced at $50 per virtual machine and has an annual support fee of $1,337.67. There's a long list of additional products available for the environment.

VMware's position atop the field may be challenged as System Center 2012 enters the lists, but it's unlikely to be threatened anytime soon. Its product line may be more than early implementers really want, but for those seeking more gains out of their virtualized environments, it has a technical lead. VMware built capacity management into vCenter Operations, but it remains a stumbling block for most virtualization management suppliers. Asked how System Center's Virtual Machine Manager deals with capacity management, Anderson responded in a briefing, "We still have some work to do there."

In VMware's year-end results reported Jan. 23, revenue reached $3.77 billion in 2011 and it projected first-quarter 2012 revenues of more than $1 billion. Net income for 2011 was $724 million or $1.68 per share, compared to $357 million or $0.84 per share in 2010. Revenue in the U.S., which is more heavily virtualized than Europe, was up 26%; international revenue grew 38%.

VMware service revenues outstripped license revenues. New license sales accounted for 31% of the year's total; services, 32%.

The fourth quarter and year's performance "signals that virtualization is the foundation for simplifying and automating IT," said CEO Paul Maritz in announcing the results.

"First-quarter 2012 revenues are expected to be in the range of $1.015 and $1.040 billion, an increase of 20-23% from the first quarter 2011," said CFO Mark Peek in the announcement. Annual 2012 revenue is projected in the range of $4.475 and $4.6 billion, an increase of 19-22% from 2011.

With Microsoft wading more deeply into the virtualization market, VMware appears to be determined to maintain its hold on the most profitable part of the market. It's conceding that some departments, early implementers, and small business may end up in the lower-cost Microsoft Hyper-V camp. But it's executing on its plan to make virtualization the management platform of the future, one that delivers more and more benefits and one that its heavily virtualized users may find they can't do without.

It's time to get going on data center automation. The cloud requires automation, and it'll free resources for other priorities. Download InformationWeek's Data Center Automation special supplement now. (Free registration required.)

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User Rank: Apprentice
1/27/2012 | 7:30:29 AM
re: VMware Wins At Show Me The Money
I just cannot get impressed by stuff that is new to x86. Unix servers have had all of this functionality and more for years.
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