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VMware Counters Microsoft, Will Make ESXi Hypervisor Free

New CEO Paul Maritz, who took over the CEO reins from Diane Greene in an abrupt changeover July 8, timed the ESXi announcement with VMware's 2Q earnings report.
Bogomil Balkansky, senior marketing manager, said dropping the $495 license price for ESXi to zero will "accelerate adoption of VMware virtualization products and help companies get to 100% virtualization in their data centers." While VMware is the current market leader, with $1.3 billion in revenue last year, much of the potential market for virtualization products remains untapped, especially among small and medium-sized businesses that are just getting started.

Balkansky said the downloadable ESXi has been given special features for ease of installation and use. "We've made strides in that area with ESXi," he said. In addition, ESX and ESXi will remain examples of mature and stable hypervisors "with a slim footprint." In addition to the free download, VMware has negotiated deals with Dell, IBM, and Hewlett-Packard that ESX will ship on servers they manufacture and configure as part of the hardware.

In the meantime, he took aim at Microsoft's assertion that virtualization belongs in the operating system. VMware remains the independent source of virtualization "with no strings attached," he said.

VMware reported its second-quarter earnings today, with revenue totaling $456 million, a 54% jump over the same quarter of 2007. Operating income as determined by generally accepted accounting procedures, was $61 million, compared with $47 million for the same period last year.

VMware reported a sharp jump in services revenue, which includes subscriptions, technical support, and professional consulting services, to $172 million, an increase of 85% over the same quarter the previous year. But VMware officials noted some weakening of its enterprise level licensing agreements in North America. U.S. revenue grew 43% compared with international revenue, which grew at a rate of 68%.

At the end of fiscal 2007, former CEO Greene projected 2008 revenue would grow at a rate of 50%. In the second-quarter report, Maritz projected 2008 revenue will grow at a rate of 42% to 45%.