Virtual Insanity aka VMware IPO


[qi:006] In a headline worthy of the New York post, The Register screamed, VMware’s IPO – Insanity turns Silicon Valley back to normal. It aptly sums up the VMware (VMW) IPO situation: the virtualization company is valued at close to $20 billion at the end of first trading day, while the company which owns 87% of VMware, EMC Corp., (EMC) has a market cap of $38 billion. Go figure!

Nevertheless, attention comes with a price. Mike MacCana, who writes the Venture Cake blog believes that VMware is a house of cards and has doubts about the proprietary nature of VMware ESX. Others disagree with his article, but it is surely worth reading, as are the comments about this issue on the Slashdot and the Google Finance Forums.


Dave Reynolds

I love when people make predictions as if today’s conditions stay static into the future. PJ’s comments above have some merit TODAY but his conclusions about the future are iffy.

Virtualization began in the mainframe world. Who would have thought 10 years ago there would be a market for VM on servers?

Who would have thought a specific product market called SMB would be carved specifically to cater to the needs of small and medium businesses?

Who would’ve thought through a package like Microsoft’s Small Business Server a small company could have their own AD domain, Exchange email, SharePoint website, CRM apps, firewall, etc.?

My point is that enterprise technology always tends to get pushed down to SMB-scale solutions. So, sure, few small businesses today see the need for VM, but that doesn’t mean it won’t ever happen.

I’m willing to bet that in 7-10 years time, a SMB customer will be able to get a decently-sized storage array (10TB?) with their small business server. And I bet VM’s integration into the overall solution(hello Cisco and Intel)will be ubiquitous and embedded. So much like people expect IIS on a server, so too they will expect VM technology.

Innovation always creates new market opportunities. New market opportunities drive expanding revenue bases, pushe down costs and enable exploitation of enterprise technology at small scales.

Now, whether VMware can sustain its innovation and market share is another question. But don’t project into the future using static market conditions and conclude that VMware is toast. The economy doesn’t stay constricted like that.

David Mackey

I love VMWare. But that doesn’t mean that Microsoft isn’t quickly catching ground, or that the open source alternatives won’t soon be playing the same game w/VMWare we currently see between Linux and Windows.


The VMware valuation and frenzy is going to get really ugly. Many of the “statistics” that have analysts so giddy are bogus. Take one – Only 5% of the server market has virtualized their servers. That is a key stat that implies a lot of headroom for growth. But where did it come from and how accurate is it? The vast majority of servers sell into the small and midsize business market – so I think you can reduce the number of servers/installations that can use virt by at least half. Of that remaining half, another quarter or so are not candidates for virt – the applications, policies, locations, etc simply won’t allow it. So, we are down to about 25% of all installed servers. And, what are those servers? Now, that is just potential for business, not immediate business. Microsoft, SWSoft, Citrix, and others are going to carve up that market over time and force a price war and there will be many free versions as well. Oh virtualization will run on other platforms like handhelds and devices, but that market is not a big money maker for anybody except service providers- by big, I mean multi-billion. So, the hype party around VMware over time will turn into a real hangover in the not too distant future, but it will take a couple of years. VMWare will never be a multi-billion dollar company unless it has something else up its sleeve. Those that buy the stock today will be sorry ….

Nick Hawkins

VMWare Fusion made me ditch Parallels for ye ol’ Mac. I like it.

In my corporate environment (like ours), we can take a high-end server and run multiple VMWare instances on it. For example, I needed a server to handle PGP Universal Server. Instead of buying the server, etc, I created a VMWare session for it. Need a test server for your application? No problem, that’s what VMWare’s for. If the server blew a board, then we copy the instances over to another ESX box and wer’e all good to go. Plus, VMWare has a huge repository for Virtual Appliances – I think over a hundred of them. If you wanted to try out some hardened security suite or some Linux variant, grab the prebuilt ones.


Bringing out innnovative products is what sets good companies apart from me too ones. I think VMWare has a bright future.


I am a big fan of VMware player. Its really easy to install and you dont even need a full fledge VMWare server to run VMware images. I was working on something that I wanted to test on linux, I just installed VMware Player and downloaded an image of Ubuntu from VMware website. The whole thing was really a walk in the park.

Om Malik


good points. I have not used it in server environment. i have downloaded fusion and want to see how it works.

will keep you posted.

Nick Hawkins

I’m a big fan of VMWare. If you’ve ever used it in a corporate environment, you’ll quickly realize that the flexibility of having a monster server where you can create VM instances for test apps far outweighs any cost.

However, the IPO insanity is fun to see in a retro sort of way. Once people calm down, I think it will have a solid market cap.


Yeah you know something is up when main street is calling VMware the next Google…

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