December 13, 2007 / 6:40 PM / 10 years ago

UPDATE 3-Microsoft starts public test of rival to VMware

(Adds VMware comment, paragraph 6)

By Jim Finkle

BOSTON, Dec 13 (Reuters) - Microsoft Corp (MSFT.O) said on Thursday that it has begun public trials of virtualization software that will compete head-on with programs from VMware Inc (VMW.N), saying the tests were starting ahead of schedule.

Shares in VMware, the world's fourth-largest publicly traded software maker, fell 3.3 percent and Microsoft shares rose 2.2 percent after the announcement on the release of the trial software, known as Hyper-V.

Microsoft said it previously told customers the first public release of the test version of Hyper-V would come out in the first quarter of 2008.

Global Equities Research analyst Trip Chowdhry said the trial version's release, which comes on the heels of Oracle Corp's ORCL.O unexpected entry into the market for virtualization software last month, is bad news for VMware.

Chowdhry said Microsoft's engineers have told him the company's Hyper-V is three times as efficient as VMware's product. Oracle has made a similar claim.

Reza Malekzadeh, senior director of product marketing and alliances for Palo Alto, California-based VMware, said that Microsoft's new software does not provide the stability or advanced management functions that his company's product does.

VMware shares fell $3.23 to $96.00 on the New York Stock Exchange. That is more than triple their IPO price of $29 a share from the company's August initial public offering.

EMC Corp EMC.N, which owns 86 percent of VMware, fell 50 cents, or 2.5 percent, to $19.18.

Typically, server computers run one operating system that might utilize 10 or 15 percent of its power. A server using VMware software can simultaneously run five to 10 or more operating systems. Each of these systems becomes a virtual machine working as an independent server.

VMware says that companies can save about $600 per year and 7,000 kilowatt hours in electricity for every software application put onto a virtual machine.

Each server removed through virtualization saves 12.5 tons of carbon dioxide emissions, which is equivalent to taking 1.5 cars off the road, according to VMware.

VMware's shares hit a record $125.25 on Oct. 31, on expectations that the software maker's technology was one or two years ahead of its competitors.

Microsoft plans to incorporate virtualization software in the first major upgrade to its business operating system for server computers, Windows Server 2008, to be released next year.

The world's largest software maker has reported multiple delays in completing the virtualization component of Windows Server 2008, which had led some investors to doubt whether it would be able to start public trials of the software in the first quarter of next year. (Reporting by Jim Finkle; Editing by Jason Szep, Leslie Gevirtz)

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