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Virtualization going gangbusters, market data shows

Recent market data proves what we already knew: the virtualization market is on fire, and sales of VMware are fanning the flames.

EMC's earnings may be down, but don't blame its subsidiary VMware. As part of EMC's earnings announcement this week, the company revealed that VMware's Q3, 2006 revenues grew 86% year-over-year to $188.5 million, and has achieved two consecutive quarters of 20% sequential growth.

The growth puts VMware on track to earn $750 million in 2006. In 2005, VMware revenues were $387 million, $218 million in 2004, and just under $100 million in 2003.

VMware attributed the growth to rapid adoption of VMware Infrastructure 3 (VI3), which includes the ESX bare-metal hypervisor. A survey conducted by also found that of current VMware users, a sizeable majority (59%) had standardized on ESX, compared with 29% that had chosen the free VMware Server (GSX).

In fact, VMware is almost single-handedly carrying the virtualization market. Last week, IDC released a report that found that the worldwide virtual machine software (VMS) market grew at an impressive 67% clip in 2005, topping the 64% growth in 2004. The market stood at $560 million in 2005, IDC finds, and is expected to reach $1.8 billion by 2010.

IDC estimates that VMware holds 55% of the market, more than three times the share of its closest competitor, IBM, which olds 18%. Microsoft's Virtual Server garnered 9% of the share, but vendors selling Xen-based hypervisors "didn't even figure," said John Humphreys, IDC program director for enterprise platforms.

"There's no doubt that VMware is the growth engine," Humphreys said.

However, Humphreys did say that VMware's success with x86 virtualization is inspiring users to take a second look at older, more established virtualization technologies such as IBM LPARs, Hewlett-Packard's Integrity Virtual Server, Sun Solaris Containers and so on. "People are re-evaluating those technologies, and vendors are sprucing them up," he said, with additional capabilities related to portability.

Humphreys still sees consolidation as the main business driver for virtualization, but other interesting use cases are emerging. "Going forward, we see mobility and availability as important themes," he said.

"For economic reasons," there are a lot of applications for which high availability isn't an option, Humphreys said. Virtualization can help. Likewise, "utility computing has been a big promise in the industry but has never really materialized." Now, with virtualization, "we're starting to see customers actually deploy what could be termed utility computing."

Let us know what you think about the story; e-mail: Alex Barrett, News Director

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