Year: 2008

The growth of VMware suffered a slow down in Q4 2007, leading the company to miss the financial forecasts. In details:

• Total revenues for the fourth quarter were $412 million, an increase of 80% compared to the year-ago quarter.
• GAAP operating income for the fourth quarter was $76 million compared to $37 million in the fourth quarter of 2006. Non-GAAP operating income was $108 million, representing 26% of fourth-quarter revenues and an increase of 72% over the year-ago quarter.
• GAAP net income for the quarter was $78 million, or $0.19 per diluted share, compared to $31 million, or $0.09 per diluted share, in the year-ago quarter. Non-GAAP net income for the quarter was $103 million, or $0.26 per diluted share. GAAP and non-GAAP net income for the fourth quarter of 2007 include a $0.01 per diluted share benefit from a change in tax rate.
• Total revenues for the full fiscal year 2007 were $1.33 billion, an increase of 88% compared to 2006.
• GAAP operating income for the full fiscal year 2007 was $235 million compared to $121 million in 2006. Non-GAAP operating income for the year was $338 million, representing 26% of full-year revenues and an increase of 77% over 2006.
• GAAP net income for the year was $218 million or $0.61 per diluted share, compared to $86 million, or $0.26 per diluted share, in 2006. Non-GAAP net income was $295 million or $0.82 per diluted share.

Despite these numbers analysts expected a sales report of $417 million and an earnings report (excluding special items) of 24 cents per share.

Several news magazines are reporting different analysis which can be summarized below:

• Missing the revenues one quarter after the IPO is the first sign of fundamental weakness in the business,” said Trip Chowdhry, an analyst with Global Equities Research in San Francisco. “The story is overhyped.” (Bloomberg)
• Trip Chowdhry, managing director at Global Equities Research, said that rivals like Oracle, Microsoft, IBM, and Xen, are taking market share away from VMware.
  Chowdhry said that VMware may have one or two more quarters of “okay” revenues before price erosion and market share losses deteriorate its business fundamentals further. (Forbes)
• JP Morgan analyst Adam Holt said that license revenue of $284 million was the problem in the quarter. License revenue fell below Holt’s $295 million revenue and the consensus of $292 million. In a nutshell, Holt said VMware had little room for error given its shares were trading at lofty levels. License revenue growth fell to 76 percent from year over year compared to 96 percent from the third quarter. Holt noted that deceleration will raise concerns about demand or a weakening economy. (ZDNet)

After-hours trading shows how the results negatively impacted investors (-26.83%):

The first 2008 updates for a virtualization platform comes from SWsoft which today announces Virtuozzo Containers 4.0 and definitively change its name (and logo) in Parallels, as announced in December.

This major release, postponed several times, unifies the Windows and Linux development branches after they remained separated for the last two years (Virtuozzo for Windows 3.5.1 and Virtuozzo for Linux 3.0), introducing some new important features likes:

• Redesigned consoles (which now include Parallels Infrastructure Manager)
• Enterprise management (multiple servers managements including templates and backups)
• Roles and permissions management
• Support for virtual SMP masking
• Support for containers live backup throuhg Microsoft Volume Shadow Service (VSS)
• Support for 3rd party backup tools (Microsoft, EMC, Symantec, IBM, CA)
• Support for Microsoft Cluster Service (MSCS) 2003 and Red Hat Cluster Suite

Download a trial here.

Both the virtualization.info Virtualization Industry Radar and the Virtualization Industry Roadmap have been updated accordingly.

Virtual Iron seems to have endless possibilities to get funded. In November 2007 the company obtained $13 million. An additional $20 million are announced today:

Virtual Iron Software, the leading provider of enterprise server virtualization made easy, today announced that it has secured $20 million in new venture equity financing. The funding, provided at an increased valuation, will be used to accelerate product development and expand global sales, marketing and distribution efforts. The investment brings Virtual Iron’s total venture funding to $65 million in invested equity capital and includes Highland Capital Partners, Matrix Partners, Goldman Sachs, Intel Capital and SAP Ventures…

Quoting from the CiRBA official announcement:

CiRBA Inc., a leader in Data Center Intelligence software, today announced that it has raised $12 million in its second round of institutional funding led by Sigma Partners. Existing investors including Edgestone Capital Partners and others also participated in the round. The funding will enable CiRBA to further accelerate growth on a global scale, with investments in sales, marketing and product development…

The glorious Citrix Metaframe which became Presentation Server over the last few years, gets renamed again and this time the change has a major relevance.

Live from Citrix Summit 08, Ruben Spruijt reveals that Presentation Server is now known as XenApp.

The inclusion of Xen in the name delivers a precise meaning: Citrix will reshape the entire offering around and on top of the Xen hypervisor.
Along with the new name, Citrix is detailing the new strategy to a sales channel eager to demonstrate something to VMware.

An aspect of IT where virtualization can bring remarkable benefits is software development and testing. Few companies are busy in this space, called virtual lab automation, and each one provides support for VMware and Microsoft platform. One of them, Akimbi, was even acquired in June 2006, and its technology is now the foundation for VMware Lab Manager and the new Stage Manager.

So far customers adopting Xen-based hypervisors were unable to buy one of these solutions, but today VMLogix introduces a version of its LabManager working with Citrix XenServer.

VMLogix LabManager for XenServer is available now and pricing starts at $25,000.

Download a trial here.

Last week Microsoft released a long press announcement detailing its renewed effort in the virtualization market:

• It announced System Center Virtual Machines Manager (SCVMM) capability to manage Citrix XenServer and Presentation Server
• It announced Hyper-V capability to use Citrix XenDeskop as VDI connection broker
• It announced acquisition of Calista Technologies to enhance its RPD protocol for VDI environments
• It announced virtualization of Vista Home Basic and Home Premium Editions
• It announced support for Office when virtualized through Application Virtualization (formerly SoftGrid)
• It mentioned an upcoming version of Application Virtualization for servers

virtualization.info has just learned that the same day VMware was answering the threat sending out to its sales channel a fierce and scornful analysis of the initiative.

Reporting the entire email content is out of purpose, but some quoted sentences may clarify the tone:

…Microsoft announced a hodge-podge of items related to virtualization in a desperate attempt to make it look like it had a new, coherent vision and strategy for virtualization…

…MSFT includes many recycled items in the announcement to make it look substantive. In actuality, they are just rehashes of old items. Microsoft is not delivering anything new, substituting marketing in place of real substance…

…The new items are a collection of loosely connected pieces thrown together to look like a coherent virtualization plan. Microsoft is still talking vision…

What follows is a list of reasons that clarifies the competitive advantage of VMware. Among them there’s a very interesting point about partnership between Microsoft and Citrix.

VMware is basically instilling the doubt that Citrix may be out of the game very soon, despite the strong relationship with its current partner:

…Microsoft’s announcement introduces new conflicts into the Microsoft-Citrix business partnership and begs the question “When will Microsoft dump Citrix and take all of the business for itself?” Is this just a partnership of convenience for Microsoft until it ships its own product?…

…Tell your prospects that are considering Citrix, that MSFT will soon cut Citrix out of the loop…and Citrix is allowing it to happen…

…New Conflict #1: Microsoft System Center or Citrix XenServer for Management…This declaration hits at the heart of Citrix’s stated business model for virtualization – to generate revenue from the management of Windows VMs with Citrix XenCenter. System Center and XenCenter are clearly competitors…

…New Conflict #2: Calista acquisition creates more direct competition with Citrix SpeedScreen (ICA)..This acquisition strikes at Citrix’s core business since ICA is Citrix’s key differentiator and competes with RDP…

The days when VMware and Citrix where great partners seem so far away now.

On his corporate blog Richard Jones, Service Director of Data Center Strategies at Burton Group, comments the competition between Microsoft and VMware, finding analogies with the historical fight between Microsoft and Novell.

Two things are incredibly ironic: first one is that Microsoft and Novell are now strong partners on virtualization against VMware, second one is that VMware is compared to a loser against Microsoft for the second time in two weeks (last one Oracle CEO compared it to Netscape).

But Mr. Jones post is interesting for another reason: throught it the Burton Group takes a strong and neat position against Microsoft.

…

You must realize that Novell’s wildly successful NetWare product of the late 1980’s and early 1990s was filling a void in the Microsoft eco-system. Granted, Microsoft had a LAN networking solution allowing for file and print in those days, but LAN Manager was poor compared to NetWare. LAN Manager didn’t scale, and performance was so poor, it really wasn’t usable for anything more than a handful of desktops.

…

So how is history repeating itself, you may ask? So in late 2004, Microsoft acquired the virtualization assets of Connectix and launched Microsoft Virtual Server 2005. By comparison to VMware, it doesn’t scale and performance is so poor its not really useful to the broad market.

…

Right now it seems that VMware is invincible (and I can remember back when it seemed Novell was invincible)…

This should provide VMware sales force enough marketing material for some months to come. Meanwhile Microsoft sales force may want to argue on credibility.

Besides founders keynotes and new products announcements, the first edition of VMworld Europe will feature a special facility called the Genius Bar.

Mimicking Apple retail stores, VMware will arrange a long desk and will pack it with company engineers and product managers, skilled on different topics. Several hanging monitors will advertise each expertise available, and attendees will just have to go and ask.

virtualization.info will be in Cannes to cover the event, and maybe will be able to discover something new from these guys.

Anyway we’ll provide live coverage of the keynotes and all the VMware announcements. Check previous coverage of TSX 2007 in Nice (part 1 and part 2) and VMworld 2007 in San Francisco.

At the event US product managers will be at the Genius Bar as well as on the stage, performing the sessions.

virtualization.info already published the introductory videos of Carter Shanklin, Product Manager for End-User Enablement, Ashwin Kotian, Product Manager of Physical Virtualization and Bing Tsai, Staff Engineer.

This Friday virtualization.info welcomes Kit Colbert:

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Register for VMworld Europe 2008 here.

For his corporate blog Simon Crosby, CTO of Virtualization & Management Division at Citrix (and former XenSource CTO), publishes an interesting post about VMware hiring techniques:

Once again (it happens every 6 months or so) VMware’s press gangs have pushed the “send” button on their spam engine looking for talent. They have spammed the entire XenServer team, and probably the entire Xen community work list, with promises of fulfilling, gainful employment, and on open source to boot!

…

I noticed some of your contributions to the Xen community. I work at VMware in Staffing for the Core Technology Group. I’m pretty sure you are not actively looking for a new position but I wanted to check with you to see if knew anyone that may be interested in interviewing to join our team. Most of what I look for in candidates is deep open source experience. People that know low level C programming typically do well here. We have an opportunity in one of our core R+D groups for someone that is open source savvy, can read low level C code, and is willing to handle Build Release for this group. I also have other opportunities that involve working with the open source community to help make Linux a better OS for virtualization. Ideally, these positions would be located in the US Palo Alto, CA or Cambridge, MA. For the Build release position, we may be willing to consider top talent being located in other facilities we have around the world. Again, I respect that you may not be looking for anything right now but if you’re interested of know someone who may be, feel free to let me know. I look forward to hearing from you…

It’s expected that VMware tries to hire away the brightest minds on the scene, and most of all those working for its competitors. Microsoft and Citrix probably do the same.

What sounds strange is that VMware head hunters don’t bother to have a personal, human relationship with someone as skilled as the Xen lead developer. At these levels hiring discussions should be more engaging than sending a predefined email template.