June 30, 2000 5:45 AM PDT

VMware ready to capitalize on hot server market

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NEW YORK--Software maker VMware, like many in the Internet-centric high-tech world these days, sees the server market as a lucrative new area ready for colonization.

In the fall, VMware will unveil two new server versions of its software, one for corporations and one for application service providers (ASPs) that host others' Internet operations on their own servers, marketing director Reza Malekzadeh said in an interview at the PC Expo show. VMware's current products enable multiple operating systems to run on a single Intel computer at the same time but are only for desktop use.

The push toward servers is no surprise.

Servers, the beefy computers that house Web sites, databases and most anything else important on a network, are in high demand with the increasing use of computers and especially of the Internet. They're also usually more complicated, critical to the workings of a business, and therefore profitable for companies selling server software or hardware.

VMware got much of its start because of the booming popularity of Linux. The software allowed people to simultaneously run Linux and Windows on the same machine. "The Linux craze took off at the right time for us, but we are not really a Linux company," Malekzadeh said.

Currently, about half of VMware's sales are to Windows users, he said. It's particularly useful for developers and help desks that need to switch among different versions of Windows. For example, a Web site programmer might want to make sure a site works with Internet 3, 4 and 5, while a technical support shop or programmer might want to make sure software works on Windows NT with support packs 4, 5 or 6, he said.

The company attracted the attention of Dell Computer, which invested $20 million in VMware.

The server push will take advantage of VMware's ability to protect against crashes, Malekzadeh said. By assigning a separate "virtual machine" to each task, one task failing won't affect the other tasks. For example, a database program running in a copy of Windows 2000 that crashes won't disrupt a separate copy of Linux running Web server software.

The upcoming corporate version is intended for smaller internal networks, where a company needs a server to perform several tasks, Malekzadeh said. The rationale for using VMware is that a single server running two tasks and costing, for example, $4,000 is cheaper to administer than two separate servers costing $2,000 apiece.

The ASP version of the software will function as an intermediate step between two popular models for hosting Web sites. Currently, options often include sharing a Web site on a server with other customers or paying a premium to get a dedicated server.

Using VMware will allow ASPs to avoid buying lots of extra servers while still being able to assure one customer that misbehavior, crashes or hack attacks on another customer's site on the same server won't bring the entire machine down, Malekzadeh said.

VMware, based in Palo Alto, Calif., has 85 employees. It was founded in January 1998. It has been profitable since it began selling its product, which costs $299 to download or $329 to order on CD.

A total of 400,000 people use the software. Five thousand buyers are corporate customers who buy in large quantity, Malekzadeh said.

The company has sought financing only once--from Dell--but that was a strategic deal, not a financial necessity, he said. Malekzadeh declined to say what, exactly, the Dell partnership will lead to other than collaboration in marketing and development of server products.

 

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