VMware Shares Dogged by Dell Storage Strategy

But VMware is a threat to Microsoft, too. And the Redmond, Wash., software giant is wary about the field of virtualization.

The technology throws the revenue model for all traditional software vendors into question, according to Greene. For developers, the issue is how to charge for multiple uses of their software on the same physical machine and virtual machines. Companies like Microsoft are working on it, Greene said, "but they are moving very carefully because it can have huge repercussions on their revenue."

Customers are realizing the ability to virtualize on a single machine is "just a tiny piece of what virtualization can do for you," Greene said. To achieve real reductions in capex and op-ex, companies need virtualization infrastructure: all the management bells and whistles controlling a data center full of servers, she said.

VMware is still adding to that infrastructure software, making virtualization management more "plug and play."

VMware's hardware partners, such as Hewlett-Packard(HPQ) and Dell, plan to sell servers with embedded VMware hypervisors. "And most servers do not come with an operating system installed on them," Greene said.

"We work with [Microsoft] because we're the best way to deliver Microsoft applications and run Windows today," Greene said. But the Microsoft approach installing virtualization on top of Windows will not be a long-term solution, she predicted. Start-ups are moving toward developing virtual appliances -- software programs that come with their own mini operating systems.

Its those developments, not Dell's purchase of a hardware maker, that should ultimately determine VMware's market-leading stamina.

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