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VMware Just Can't Catch a Break

The company has lost its chief scientist while Microsoft has come out with its latest virtualization products.
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SAN FRANCISCO - VMware (VMW) faces new-but-anticipated challenges from Microsoft (MSFT) and from internal turmoil with the resignation of its chief scientist late Monday.

Taking aim at VMware's revenue stream, Microsoft took the wraps off its latest virtualization products Monday afternoon.

And VMware chief scientist Mendel Rosenblum announced his resignation in a message to employees late Monday, according to

The New York Times

. Analysts have speculated that he would leave the company after his co-founder and spouse Diane Greene was forced out as CEO in July.

Shares of VMware were down 13 cents, or 0.4%, to $34.78 in recent trading, after ending Monday down 3.5%. Microsoft shares were recently up 25 cents, or 1%, to $26.37.

VMware shares have struggled since the July announcement that revenue annual growth has slow to an expected 40%, from 89% in late 2007.

Rosenblum stepped down just one week ahead of the virtualization leader's annual user conference. Greene was forced out by majority owner




The VMware board chose former Microsoft executive Paul Maritz as the company's new CEO.

Rosenblum reportedly said he will return to Stanford as a full-time professor. Another key executive left the company in August after less than a year.

Also getting a jump on the VMware conference, Microsoft announced expanded virtualization capabilities Monday. Bob Muglia, senior vice president of the server business, said Microsoft will ship its System Center Virtual Machine Manager and the new Hyper-V Server within 30 days. Virtual Machine Manager provides tools for IT managers to control virtualized servers.

Microsoft hopes the new products will cut into VMware's lead in virtualization technology, which helps IT departments consolidate servers and save on energy costs. Microsoft, though, admits it still has more work to do to catch up.

A Microsoft executive called the Hyper-V Server a "standalone, bare-metal hypervisor," onto which users can load either a Windows or a Linux operating system. The product appears to answer VMware's criticism that Microsoft's Windows Server 2008 with Hyper-V limits users' configuration choices by integrating the hypervisor virtualization software atop the Windows operating system.

VMware loads the hypervisor software directly onto server equipment without an operating system, letting users choose the OS atop the hypervisor.

Executives said Microsoft will charge a total of $21,200 for System Center with Virtual Machine Manager and Virtualization Server 2008. In an apples-to-oranges comparison, they said the cost is about one-third that charged by VMware for virtualization-management software plus the Windows Server 2008. The products from each company provide management functions not found in their competitor's product.

Microsoft also demonstrated its live migration technology by switching a running application - a video stream - from one server to another with no pauses to the video. That technology is not yet commercially available from Microsoft. Muglia said it would be delivered in the next versions of the Hyper-V hypervisor and Windows Server.

Microsoft's live migration corresponds to VMware's VMotion capability, allowing IT managers to move open applications without disrupting their use.

"We're still early in the deployment of Virtual Machine Manager and Hyper-V," said Bob Kelly, Microsoft vice president of infrastructure server marketing.