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VMware Slashes Virtual Server Prices

Seeking to beat Microsoft at its own game, VMware has drastically cut prices on its GSX Server, software that virtualizes machines in departments and other less demanding workloads.

VMware's software helps consolidate server workloads by allowing clients to partition and isolate servers into virtual machines, each of which can run standard operating systems, such as Windows, Linux and NetWare.

Customers are increasingly using virtualization to improve the efficency of their data centers by shifting computing resources around.

Michael Mullany, vice president of marketing at VMware, said VMware will lower the price of GSX Server for Windows and Linux operating systems from $2,500 to $1,400 for a two-CPU license.

VMware will also now charge $2,800 for an unlimited license that supports systems with up to 32 CPUs. Previously, the concern was charging $5,000 for a four-CPU system and $10,000 for an eight-CPU GSX server, which Mullany admitted didn't sell much.

"We're doing this because we can afford to," Mullany said. "We grew 30 percent quarter-on-quarter from Q2 to Q3 and grew our revenues from $47 million to $61 million." He also said the company wanted to lower the barrier of entry to virtualization technology for more cost-conscious companies.

But the decision was also aimed at undercutting Microsoft, which makes a competing product dubbed Virtual Server 2005. Mullany noted VMware seeks to offer customers "the lowest total acquisition costs for a virtualization server without having to pay for client access licenses or terminal services licenses."

These are licenses that Microsoft charges that drive up the total cost of ownership for customers, Mullany said.

While the Virtual Server 2005 Standard Edition costs $499 for up to four processors and $999 for a 32-CPU license, Mullany said adding costs for the Windows license brings the acquisition cost to $1,500 on a standard edition and as much as $4,000 for the enterprise edition. Of course, there are Windows client-access licenses to account for as well.

Moreover, even if clients are running Linux or NetWare, users accessing those systems running on Virtual Server have to pay Windows client-access licenses. "It's kind of a hidden tax on the use of Linux or NetWare in a virtualization environment."

Mullany admitted that slashing the price for one of its most popular products is a way to pressure Microsoft's products; but he also stressed that its primary motivation is to provide customers with virtualization options as their interest in the technology grows.

"We think that this is the type of market where if you bring the price down people are going to try it," he said.

Cutting prices for its software is not a new practice at VMware. The EMC-owned subsidiary pared the cost for its workstation product from $300 per copy to $189 per copy, which Mullany said accelerated its unit sales.