Microsoft to push virtualization

Microsoft wants a piece of that action. In some ways, Microsoft should have owned the market from the outset. Virtualization is about managing computing resources, a core task of the operating systems at the heart of Microsoft's product line. But analysts say Microsoft's virtualization technology was mostly an afterthought and rarely met demanding users' needs.

That opened the door for VMware, primarily, to gobble up the new business. IDC's Humphreys estimates that VMware takes in between 85% and 90% of the virtualization software market. The company's stock has almost tripled since its initial share sale Aug. 14.

Virtualization is tiny relative to the nearly $60 billion in revenue Microsoft expects to generate in the fiscal year that ends in June. But the business is expected to almost triple by 2011, according to IDC. What's more, customers are increasingly asking for virtualization technology. That opens the door to VMware and other companies that develop not just for Microsoft's Windows but also for the competing Linux operating system. "If you don't align with the direction that customers go, you have problems," says Jonathan Eunice of market research firm Illuminata. "That's where the risk of disruption occurs."

Microsoft's latest stab at virtualization will come with the release of Windows Server 2008 Hyper-V, expected during the third quarter of 2008. The product will let users easily shift resources from one server or desktop PC to another. Additionally, Microsoft will announce the acquisition of Calista Technologies, a San Jose (Calif.) maker of graphics technologies that will enable full-fidelity desktop computing through virtualization without the need for a high-end PC. And the company is modifying its software licenses to make the product more affordable.