Challenging Microsoft With a New Technology

“Our strategy is to integrate virtualization into our product line in Windows, with our management software and the familiar Microsoft developer tools,” said Mike Neil, a general manager in the Windows server division.

Microsoft has a long way to go. At the end of last year, more than 80 percent of virtualized computing workloads ran on VMware, analysts estimate, with the remainder shared by Microsoft, Citrix Systems’ Xen, Virtual Iron and others. But only 15 percent of servers have been virtualized, and with that percentage likely to at least double over the next five years, there is still plenty of opportunity in the market.

There is considerable interest in Microsoft’s offering, analysts say. A recent report by Gartner projected that Microsoft’s share of installed virtual machine software would increase to 29 percent by the end of 2012, from 8 percent at the end of last year.

“Microsoft is going to be very formidable in this space,” said Stephen F. Shuckenbrock, president of the large enterprise division at Dell, which is a partner of both VMware and Microsoft. “Many customers, at the very least, are intrigued by the free virtualization software bundled by Microsoft.”

VMware, based in Palo Alto, Calif., is a formidable company today, solidly profitable with $1.9 billion in revenue last year. (It is majority owned by EMC but reports financial results separately and has its own stock listing.) The company Mr. Maritz inherited last year, when the founders, Diane Greene, the chief executive, and her husband, Mendel Rosenblum, a Stanford computer scientist, departed, had a “great foundation with wonderful people and wonderful technology,” Mr. Maritz said.

Still, Mr. Maritz added, VMware needed to move up the technology ladder and “master some new tricks” to stay ahead of Microsoft. Whether it can do that in the long run is the big question surrounding the company.

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“It has fantastic technology, but will it be a fantastic business?” asked A. M. Sacconaghi, an analyst at Bernstein Research. “The browser was fantastic technology, but it turned out not to be good business.”

Both Mr. Maritz and Mr. Nielsen are veterans of the browser wars of the 1990s, from the Microsoft side. They are optimistic that VMware can stay ahead. “This is going to be a battle for sure,” Mr. Nielsen said. “But we are going to stay focused and continue to outrun them.”