VMware Enters Brave New World at VMworld, Desktop and Server Virtualization's Biggest Stage

On the eve of virtualization's biggest week, VMworld, VMware, the undisputed king of desktop and server virtualization, faces down new competition from Microsoft and Citrix and internal unrest from within. Citrix Systems XenSource and Microsoft's Hyper-V present virtualization competition in a space VMware once dominated alone. CEO and President Diane Greene was fired and Mendel Rosenblum, VMware's chief scientist, who co-founded VMware with Greene, resigned.

In the summer of 2007, VMware, with a successful IPO under way and hardly any serious competition in the market, began to look more and more like a critical darling of the IT industry and the company poised to dominate the x86 virtualization market for the foreseeable future.

Now, in the autumn of 2008, those days seem long gone.

It started almost immediately after the VMware IPO, when Citrix Systems laid down $500 million to buy XenSource to challenge VMware both in the data center and on the emerging desktop virtualization scene. Then Microsoft-belatedly-rolled out with Hyper-V, which could help the software giant build a franchise with small and midsized businesses that are interested in virtualization but had not already invested in VMware.

Those two major developments ignore many of the other challenges that have sprung up, from Oracle to Red Hat's acquisition Sept. 4 of desktop virtualization specialist Qumranet to Sun Microsystems' release of its version of its open-source xVM VirtualBox software a week later.

While VMware forged ahead, the company hit another bump in the road when parent company EMC and its top management decided to oust VMware CEO and President Diane Greene, who co-founded the company and led it through the 2007 IPO. It came as no surprise that Mendel Rosenblum, VMware's chief scientist, co-founder and Greene's husband, announced Sept. 8 that he would leave. Other executives have left as well.

In July, VMware pulled in $456 million in revenue, but that did not stop EMC from letting Greene go. Industry observers believe part of EMC's problems with Greene were that VMware-s revenues have been below Wall Street expectations, causing the stock to slide.