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Sporkman
January 21st, 2008, 06:38 PM
http://www.forbes.com/2008/01/20/microsoft-vmware-calista-tech-cx_wt_0121microsoft.html?partner=yahootix


Microsoft Pushes Virtualization

Wendy Tanaka, 01.22.08, 12:01 AM ET

"Watch out, VMware. We're coming after your space!" is the underlying message of Microsoft's new strategy for virtualization--software services that help businesses reduce costs and improve business processes.

Microsoft on Monday planned to announce what it calls a companywide strategy to accelerate broad adoption of virtualization by its customers. As part of the its new approach, the Redmond, Wash.-based software giant unveiled a suite of services aimed at reducing the number of servers businesses need to use, separating applications from operating systems, and reducing costs and--thanks to trimmed energy use--lowering carbon emissions, too.

Industry experts say virtualization is the wave of the future in enterprise computing. Sector leader VMware, of Palo Alto, Calif., shined a light on the space last fall after its ultra-successful initial public offering. Since then, other business-software makers have been rushing to offer similar services.

Microsoft announced that it competed acquisituion of Calista Technologies, a San Jose, Calif.-based start-up that makes computer graphics for virtualized computers, and an expanded partnership with Citrix Systems, a VMware competitor based in Fort Lauderdale, Fla. Microsoft and Citrix will jointly market services that "virtualize" computers, operating systems and applications.

Microsoft's shot across the bow at VMware is inevitable as companies throughout industry shift to Web-based services. "Microsoft needs to get something into the market quickly," says Roger Kay, president of technology research firm Endpoint Technologies Associate. "Windows Office has 10 years to burn, but it will become less relevant."

He notes that virtualization could prove more profitable for Microsoft than, say, search advertising, where it is a distant No. 3 to Google, because the company already has a strong presence in the enterprise space.

Microsoft wouldn't disclose how much it paid for Calista, but Kay speculates that the price tag was likely south of $100 million. He also says Microsoft may be interested in acquiring Citrix. "Citrix, on its own, has a small market share," Kay says. "VMware was cleaning its clock." A Microsoft-Citrix combination could present formidable competition to VMware, he suggests. Buying Citrix, however, would be a significant deal: The company has a market capitalization of $6.4 billion.

IBM first introduced virtualization for mainframe computers in the early '60s, but analysts say enterprisewide advancements are more recent. A fully virtualized enterprise is years away. Microsoft estimates that only 5% of businesses are using virtualization.