VMware Announces Q2 '08 Earnings, Makes ESXi Hypervisor a Free Download

In a conference call earlier today, VMware discussed its Q2 2008 financials, introduced new President and CEO Paul Maritz, then dropped the bombshell: the VMware ESXi hypervisor would be available as a free download starting sometime next week.

VMware reported that revenues for the second quarter of 2008 were $456 million, an increase of 54% from the second quarter of 2007. The company has more than $1.5 billion in cash reserves, and said that second quarter U.S. revenues grew 43% to $240 million when compared to the second quarter of 2007. The company had better luck on the international front, with revenues there growing 68% to $216 million when compared to the same period last year. These results were slightly below what some analysts were expecting, but Maritz touted the sales results in a statement released in advance of the conference call. "VMware had another solid quarter, proving that the quality of our products and the immediate return on investment that they yield is delivering high value to customers,” said Maritz.

After discussing the Q2 financial results, Maritz briefly touched on what he sees as future opportunities for growth, including leveraging VMware's dominance in virtualization to give the company a head start in the burgeoning cloud computing space. "[We plan] to extend usage of our technology to the cloud and over the internet," Maritz said. "Our virtual infrastructure product has relevance in the cloud as well as an onramp into the cloud." Maritz pointed to some VMware partners that were already using VMware's Virtual Infrastructure product in that fashion, such as SunGard Availability Services. "We are also on the threshold of a major new opportunity – as customers begin to leverage VMware as both the on-ramp to the Cloud and for key elements of the Cloud itself. We are well-positioned to become a truly strategic platform for businesses of all sizes.” 

Maritz saved arguably the biggest news for last, announcing the VMware would be making its ESXi hypervisor product--currently priced at $495--completely free and available for download the week of July 27th. In a follow up call with Windows IT Pro after the earnings discussion, VMware Vice President of Products and Solutions Raghu Raghuram mentioned that the free, downloadable version of ESXi would be released after ESX 3.5 update 2, which would be available after July 28.

VMware's decision to give ESXi away for free proves that the company is getting ready for a punishing battle with Microsoft over the virtualization market, and is preparing for a long-term struggle to defend their dominant market share in the virtualization market. Maritz provided some insight on Microsoft during the call, and suggested that as powerful as Microsoft is, it doesn't always win.

"I spent 15 years at Microsoft...and I know that Microsoft is a formidable, but not invincible, competitor," Maritz said. "They can play a long waiting game, but when a competitor has a lead...and they invest and innovate to maintain that lead, they can be very hard to catch. We have a strong lead. Microsoft has announced Hyper-V, but Hyper-V is new, and will take time to mature. They also have nothing comparable to VMware Infrastructure 3 (VI3). We have a lead, and we intend to stay ahead. When competing against Microsoft, it's important to neither rest on your laurels or get mesmerized [with the thought of competing with Microsoft]."