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
, that traditionally sell to IT departments and keep virtualization prices high for resellers, such as server vendors.
"Channel, scale and
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
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
, both channel partners of VMware.
In addition, he said Citrix can sell XenSource software into its extensive base of 200,000 customers.
"The thing that VMware fears most is Microsoft," Bara said, touting Citrix's and XenSource's long-standing partnerships with the Redmond, Wash., software company.
Microsoft will release its primary virtualization software, Viridian, in 2008.
"When Viridian ships, Citrix XenSource tools will run right on top," Bara said.