Database software giant Oracle announced Monday that it is releasing Oracle VM, its new virtualization technology, for free download as of Wednesday. Oracle will sell service contracts for Oracle VM for $499-999 per year. Virtualization technology creates virtual versions of operating systems, servers and data storage devices, thereby reducing server numbers, downtime and maintenance and saving space and electricity costs. Oracle claims its software is three times as efficient as that of its rivals, which include VMware and Microsoft. VMware, which had one of the summer's most successful IPOs, holds 85% of the market. "Is this bad news for VMware? Yes," said Global Equities Research analyst Trip Chowdhry. "This tells us that the virtualization market will not belong to VMware." A VMware spokesman responded to Oracle's challenge by saying, "We believe customers want a consistent approach to virtualization that has a proven track record with mission critical deployments and a complete offering." On Monday, Hewlett-Packard unveiled its own series of new virtualization products for data centers. Last week, Dell said it will pay $1.4 billion for virtualization-optimized storage vendor EqualLogic. IBM is also pursuing virtualization technology. The IDC research firm forecasts the information technology market will reach $11.7 billion by 2011. VMware shares fell 8.4% to close at $80.36 Monday and then shed another 3.8% to $77.30 in AH trading following Oracle's announcement.
Commentary: Virtualization: The Real Market Scrum Is Just Beginning • VMware: Dominant in Its Market, But Upside Priced In? • Dell Bolsters Channel Ties with $1.4B Acquisition of EqualLogic
Stocks to watch: ORCL, VMW. Competitors: HPQ, IBM, RHT, NOVL, MSFT, CTXS. ETFs: IGV, SWH, PSJ
Earnings call transcript: Oracle F1Q08