Battling with an increasingly tough economy, virtualization trailblazer

VMware

(VMW) - Get Report

is planning to launch a raft of new products this year in an attempt to fight the IT spending slowdown.

VMware, which reported fourth-quarter revenue growth of 25% late Monday, issued much

weaker than expected

first-quarter guidance, underlining the

importance

of the firm's new products.

The Palo Alto, Calif.-based company is planning major upgrades around server and desktop virtualization and

cloud computing

, which is widely regarded as one of this year's

hottest technologies

.

"We still see lots of opportunities ahead of us," said VMware CEO Paul Maritz during a conference call Monday. "Looking forward to 2009, we will continue to drive forward with these three product initiatives."

Specifically, VMware will be launching a "major update" to its server virtualization products this year, according to Maritz, who took over from ousted VMware CEO and founder Diane Greene last July. "We and our partners are preparing a real banquet for our customers," he added.

In addition, the software company will be unveiling new management and automation products, enhancements to its desktop virtualization offerings and a "significant upgrade" to its vCloud technology.

VMware, which bought processor specialist

Trango

in October, will also be devoting R&D resources to new "non-X86 processors" to extend virtualization to mobile phones, according to Maritz.

The software specialist acknowledged the difficult economic climate in its fourth-quarter results, released Monday, as the firm projected low first-quarter revenue.

"All the indications are that the first quarter is going to be a quarter of indecision," explained Maritz. "We have thus taken a conservative stance on the quarter."

VMware issued first-quarter guidance of $475 million, which includes an anticipated 10% year-over-year decline in license revenue. Analysts had estimated first-quarter revenue of $496.53 million.

If the company's revenue comes in as expected, it would mark the first ever sequential decline in VMware's sales. Attention is also shifting to the software company's competitors.

While VMware virtually created the virtualization market as we know it, rivals

Citrix

(CTXS) - Get Report

, and, more recently,

Microsoft

(MSFT) - Get Report

, have ramped up their efforts in this space.

Figures released last year by technology research firm

IDC

suggest that VMware accounts for 78% of the x86 virtualized server market, although Microsoft's

Hyper-V

technology is starting to make its presence felt.

VMware's ESX and VMware Server products accounted for 44% of new x86 virtual server licenses, according to IDC, although Microsoft's Virtual Server 2005 and its recently-launched Hyper-V offering grabbed 23% of the market.

Maritz said Citrix remains VMware's No. 1 competitor, adding that Microsoft is yet to register on many users' virtual radars.

"At this point, we're still largely seeing them in the hypothetical case," he said, describing the "slideware" comparisons under way at sites where Microsoft already has a sales presence.

The CEO, however, admitted that he is not under-estimating the threat posed by the Redmond, Wash.-based software behemoth.

"We don't see a major impact yet, although Microsoft is a major force in the marketplace and we have to take them seriously," he said during the conference call.

Clearly, Microsoft could turn the heat up on VMware in 2009.

"Competition from Microsoft will remain a key area of focus," wrote Todd Weller, an analyst at investment research firm Stifel Nicolaus, in a note released Monday, asserting that VMware still has a feature/function advantage over its rival. "

But we do believe pressure from Microsoft in 2009 remains a key risk."

At least one analyst, however, warned that VMware is fighting a war on a number of fronts.

"Although an in-line December quarter should provide a temporary lift to VMware shares, the rebound is unlikely to be sustainable and we would not chase the stock, given VMware's relatively high valuation, decelerating growth, and increasing competition," wrote Goldman Sachs analyst David Bailey, in a recent note.

VMware's shares slipped 21 cents, or 0.95%, to $21.89 in extended trading.