Microsoft targets VMware with new deals

By Daisuke Wakabayashi and Jim Finkle

SEATTLE/BOSTON (Reuters) - Microsoft Corp (MSFT.O: Quote, Profile, Research, Stock Buzz) said on Monday it bought a start-up company called Calista Technologies and expanded its alliance with Citrix Systems (CTXS.O: Quote, Profile, Research, Stock Buzz), targeting the fast growing virtualization market.

Microsoft's moves are part of a broader call to arms against the early leader VMware Inc (VMW.N: Quote, Profile, Research, Stock Buzz) in the market for technology that allows a single computer to act like many "virtual" machines, thus expanding its capacity to run various types of software and multiple operating systems.

"This is Microsoft coming out and staking the claim that they are serious about virtualization," said Forrester Research analyst Natalie Lambert. "When you think of VMware, you think virtualization. That is going to be a hurdle for Microsoft."

Virtualization is one of the most important developments in the software industry, because it disrupts the traditional business model, which marries one machine to one piece of software, such as an operating system.

The technology allows companies to save on hardware costs by running existing equipment more efficiently, while allowing companies to deploy applications faster without worrying that certain pieces of software will clash with one another.

Microsoft, the world's largest software maker, acquired Calista for an undisclosed sum. Calista designs technology that helps compress and deliver "virtualized" desktops running on a remote computer server.

Citrix is developing a software tool that helps Microsoft's new Windows Server 2008, which will incorporate virtualization technology known as Hyper-V, to be compatible with Citrix's competing XenServer product.

The two companies will also join together in marketing desktop virtualization, which separates a computer's desktop from its physical location. For example, a traveling worker may access the desktop computer in his office by calling up a virtualized version of the machine over an network connection.