RealTime IT News

Oracle Adds Virtualization, VMware Shares Fall

Oracle made a move on Monday to take on VMWare in the market for virtualization software, unveiling a product that it says is three times more efficient than competitors' offerings.

VMware shares fell more than 6 percent after executives at Oracle, the world's second-largest software maker, demonstrated the product before thousands of customers at a conference in San Francisco. Oracle shares rose over 2 percent.

Customers can download "Oracle VM" for free starting on Wednesday, the company said. Oracle will sell service contracts for the product ranging from $499 to $999 per year.

Virtualization software allows companies to save costs by squeezing more resources out of each computer, helping businesses save on electricity, space in data centers, maintenance fees and other expenses.

That market is now dominated by VMware, an affiliate of EMC.

"Is this bad news for VMware? Yes," said Trip Chowdhry, an analyst with Global Equities Research. "This tells us that the virtualization market will not belong to VMware. One of the players will be Oracle. Until today that news has not been factored into the stock price."

VMware could not immediately be reached for comment.

It went public in August in what was the hottest technology initial public offering in years. VMware, which is still 86 percent owned by EMC, has a market value of about $34 billion, making it the fourth-largest publicly held software maker in the world.

The stock was trading down 6.7 percent at $81.89 late in the session, after falling as low as $81.50 earlier in the day on the New York Stock Exchange, but it remains far above its IPO price of $29 a share.

EMC shares were down 4.5 percent to $19.02.

Oracle shares were up 2.1 percent to $19.77.

Oracle's services contracts cover updates, bug fixes and other support services and will cost either $499 or $999 per year, depending on the type of computer that is running the software, according to its Web site, www.oracle.com/virtualization.

Microsoft, Red Hat Novell and Citrix Systems also sell virtualization software, though the functions are more limited than those of VMware products.