VMware's Dominance Questioned
11/08/07 - 03:23 PM EST
Ivy Lessner
SAN FRANCISCO -- VMware(VMW Quote - Cramer on VMW - Stock Picks) continued to bleed Thursday as some of its smaller competitors questioned its hold on the market.
Stock in the Palo Alto, Calif., virtualization company fell $13.25, or 12.9%, to $89.25 in late trading. That makes for a 27% drop in the high-flying stock since Nov. 1. In a discussion on virtualization Wednesday, Goldman Sachs analyst Sarah Friar posed the question of whether VMware, the "big gorilla," has an unbreakable hold on the market. "It's not a foregone conclusion that they're the gorilla forever," said Edward Walsh, CEO of privately held virtualization competitor Virtual Iron. Noting a strong VMware is healthy for the information technology sector, he said an "unchallenged VMware" might shut out many software companies, such as Symantec(SYMC Quote - Cramer on SYMC - Stock Picks), that traditionally sell to IT departments and keep virtualization prices high for resellers, such as server vendors. "Channel, scale and Microsoft(MSFT Quote - Cramer on MSFT - Stock Picks) are three things that are going to change this market," added John Bara, vice president of marketing for virtualization software vendor XenSource, which is now owned by Citrix(CTXS Quote - Cramer on CTXS - Stock Picks). Virtual Iron and XenSource compete with VMware for customers. "VMware's advantages are starting to erode," said Bara, noting Citrix and XenSource now have virtualization reseller agreements with Dell(DELL Quote - Cramer on DELL - Stock Picks) and Hewlett-Packard(HPQ Quote - Cramer on HPQ - Stock Picks), both channel partners of VMware.
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