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VMWare’s vSphere 4 cloud operating system will allow solution
providers to bring virtualization to their small and midsize business
customers for as little as $166 per processor.

While large
enterprises have been the traditional target for solution providers
bringing instant ROI with virtualization deployments, SMBs have focused
on using the technology for business continuity and high availability,
says Joe Andrews, VMware’s SMB Group product marketing manager.

"For large enterprises you get immediate ROI," Andrews says in a
statement. "For SMBs, [virtualization] is still compelling, but with
tens of servers rather than hundreds, the numbers don’t add up as
quickly so the focus has been business continuity and availability," he

VMWare’s vSphere 4 has an entry-level price point of just $166 per
processor, which allows SMBs to consolidate servers without breaking
the bank while still enabling the benefits of business continuity and
high availability.

Beyond the price point, VMWare has also announced specific disaster
recovery and business continuity solutions based on technology from
disaster recovery service providers SunGard and BlueLock.

Despite interest from solution providers and SMB customers, VMware
doesn’t expect vSphere 4 to make a significant revenue contribution in
the short term, says Paul Maritz, VMware’s CEO.

Maritz, who assumed the role of CEO in July 2008, says vSphere is one
of a number of strategies to drive new revenue. Other initiatives
include putting hypervisors on desktop computers, as well as in mobile
phones and handheld devices.

The hope is that vSphere will boost revenue by attracting existing
customers looking to better manage their hypervisors or attracting new
customers to use VMware hypervisors.

If successful, the new software could drive greater investment in
VMware technologies, said Tim Klasell, an analyst at Thomas Weisel
Partners in a recent research note.

"vSphere’s going to have a very profound effect, but it’s going to take
… several months for it to fully work its way into the marketplace,"
Maritz said during a conference call this week. "So we don’t expect any
dramatic near-term effect on our revenue stream," Maritz says.

The launch of vSphere 4 comes as the virtualization giant struggles to
find new revenue streams, industry analysts say. Sales of its core
hypervisor have slowed as the market matures and competition from
Microsoft’s HyperV is growing.

VMware has already issued a revenue warning based on slowing sales of
hypervisor software, and in January the company said it expects its
first sequential revenue decline in the fourth quarter.