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VMware has announced VMware View 4, enabling rapid adoption of virtualized desktops and establishing a desktop as a managed service model.

VMware View 4 is a desktop virtualization solution that it claims sets a new quality, cost and scale standard for desktop virtualization environments. Built on VMware vSphere, the industry’s leading virtualization platform, VMware View 4 is a complete desktop virtualization solution featuring a rich, flexible desktop user experience while delivering dramatic efficiency, security, performance, scalability and management improvements — all while reducing desktop total cost of ownership by as much as 50 percent.

Desktop virtualization has long remained a top IT goal because of the added security, manageability and compliance capabilities delivered. Adoption, however, has been limited due to high acquisition costs, insufficient user experience, scalability issues and limitations on the use cases that could benefit from virtualized desktops. With VMware View 4, VMware and its ecosystem of partners eliminate these barriers, enabling broader, mainstream enterprise adoption of desktop virtualization.

VMware View 4 provides:

• Simplified desktop provisioning and management with flexible on-demand provisioning of thousands of desktops and applications instantaneously and the ability to manage up to tens of thousands of desktops from a single console
• User flexibility and rich user experience with always on access to applications and desktops from nearly any device
• Differentiated desktop SLAs including enterprise-class availability, disaster recovery, failover and scalability supporting tens of thousands of users across the enterprise
• Improved security and compliance through centralized management of security policies permissions and updates

VMware View 4 establishes a new desktop experience standard, capable of satisfying the broadest range of users — from the basic task worker to the designer, with a rich, high-quality user environment across the widest range of devices and networks. View 4 will deliver a complete desktop environment including:

• VMware View with PC over IP (PCoIP) — New adaptive display protocol specifically developed for virtual desktop delivery dynamically detects device type, network connections and locations providing the optimal desktop experience for each unique user scenario. Only VMware View with PCoIP analyzes and optimizes for both hardware and software environments. A strong ecosystem of hardware and solution providers have announced support for PCoIP, enabling adoption and support of this key innovation.
• VMware View Display — Multi-monitor, adaptive display support, resolution optimization for each monitor with an option to pivot and rotate the display output, supporting rich audio and video content with increased performance.
• VMware View Direct — Seamless mapping from the virtual desktop to the end users device for locally attached peripherals through USB connection for increased productivity.
• VMware View Printing — Users automatically discover, connect and print to locally attached printer without the need to install print drivers. Delivers a high quality printing experience even over low bandwidth connections.
• VMware View Unified Access — Continuous desktop availability with a single point of authentication for users to access — VMware View environments, Windows Terminal Servers, Blade PCs or even remote physical PCs.

VMware View 4 will establish new levels of efficiency and cost savings through product advancements and close collaboration with partners, driving down storage, networking and compute resource costs.

• Platform Optimization — VMware View 4 is built upon VMware vSphere 4, the industry’s leading virtualization platform. VMware vSphere 4 includes unique enhancements for desktop virtualization, delivering better performance and higher virtual machine densities to support demanding desktop environments on a minimum number of servers, reducing overall costs.
• Centralized Security and Management — VMware View 4 will enable enterprises to significantly reduce the ongoing management and operating expenses associated with desktops. Centralized management, standardized desktop images and flexible provisioning and upgrades enable enterprises to manage thousands of users from a single console while bringing greater enforcement of security, permissions and compliance policies. Customer deployments consistently demonstrate administrative cost reductions of 50 percent or greater.
• Broad Ecosystem Alignment — Desktops as a managed service requires coordination between multiple software and hardware infrastructure providers to reduce the overall solution cost and to drive support and interoperability. Through close collaboration with key partners ranging from PCoIP hardware endpoints and other thin clients to management, security, storage and network infrastructure providers, and ISVs, VMware has further reduced acquisition costs and TCO for customers. VMware and partners have designed, built, and validated end-to-end solutions of hardware and software to take the guesswork out of designing a virtualized desktop deployment, documented in reference architectures

New Scalability and Performance Standards

VMware View 4 also raises the bar for performance and scalability of desktops with:

• Industry-Leading Virtualization Platform — VMware vSphere 4 will ensure scalability and consistent performance regardless of desktop loads and across peak usage periods, balancing resources and requirements for optimal performance, without disruption or downtime. Proven in the most demanding enterprise environments, vSphere will deliver unparalleled availability and business continuity for virtualized desktop environments, ensuring the highest level of performance without disruption to desktop users.
• Scalable Desktop Management — With VMware View 4, customers will be able to deploy and manage up to tens of thousands of desktops as a result of advancements in desktop brokering technology.
• Partner Ecosystem Optimization — VMware View takes advantage of unique optimization at the CPU, hardware, server and network levels to drive the highest performance, highest quality solutions. Partners also have provided reference architectures (http://www.vmware.com/products/view/resources.html) — blueprints showing best practices for deploying virtualized desktops — for VMware View 4.

Pricing and Availability

VMware View 4 will be generally available on November 19, 2009 through VMware sales and the company’s extensive network of OEM partners and channel partners.

VMware View 4 is a family of products available in two editions:

• VMware View 4, Enterprise Edition: includes VMware vSphere 4 for desktops, VMware vCenter 4 and VMware View Manager 4, a flexible desktop management server enabling IT administrators to quickly provision and tightly control user access.
• VMware View 4, Premier Edition: includes VMware vSphere 4 for desktops, VMware vCenter 4, VMware View Manager 4, VMware ThinApp 4 and VMware View Composer requirements.

VMware View 4 Enterprise Edition is priced at $150 per concurrent connection and the VMware View 4 Premier Edition is priced at $250 per concurrent connection.

According to IDC’s Worldwide Quarterly Server Virtualization Tracker, 16.5% of all new servers shipped in the second quarter of 2009 (2Q09) were virtualized, an increase from 14.5% in 2Q08. However, actual shipments decreased 21.0% year over year to 246,000 physical servers in 2Q09 as customers continue to limit spending on new server hardware relative to last year. Similarly, worldwide virtualization software revenue declined 18.7% year over year in 2Q09 to $344 million. Virtualization licenses did grow quarter over quarter in 2Q09. The server virtualization market continues to shift towards the use of paid hypervisors, with paid virtualization software now running on 60.8% of all new server hardware shipments virtualized in 2Q09, an increase over 57.2% in 2Q08.

“Server virtualization has forever changed how customers manage their datacenters,” said Michelle Bailey, research vice president of Datacenter Trends at IDC. “‘Virtualization First’ is now the default approach for new server deployments at most enterprise IT organizations and is quickly becoming the foundational platform for cloud computing initiatives among service providers. Additionally, growth in emerging regions is accelerating as the economic downturn limits the ability of organizations to raise capital. The next phase in virtualization will require a reinvention of IT policies and procedures and continued adoption of automation tools will be key as virtual machine densities rise and customers find themselves facing virtual server sprawl issues.”

Hewlett-Packard held onto the number 1 spot for worldwide new server shipments virtualized with 36% market share. HP’s shipments declined 18% year over year in 2Q09 but grew 1% sequentially. These results were driven primarily by its x86 Proliant server business. Dell continues to distance itself from the remainder of the field as the number 2 vendor with its market share growing 9% over 1Q09. Dell’s relatively strong performance was driven by growth of Intel-based x86 servers in a weak market. IBM remained in the third position with 15% market share. IBM achieved 14% sequential growth driven by a solid performance from its converged System p and x86-based servers.

VMware continues to hold the number 1 (VMware ESX) and number 2 (VMware Server) virtualization platforms despite revenues declining 22% year over year. This was slightly more than the decline of 21% in total x86 virtualization licenses. Microsoft saw its virtualization license shipments decline 16% year over year, due to the continued depreciation of Virtual Server 2005. However, Hyper-V showed a sharp increase of 54%, one year after its official launch and entrenching itself into 4th place while it cannibalizes itself into the number 3 position, past Virtual Server 2005. Parallels Virtuozzo rounds out the top 5 with license shipments declining 36% year over year. Citrix XenServer showed the largest increase, growing 108% year over year due to the company changing its business model and offering the product for free with certain management functionality. It’s a bold seeding strategy that will see market share gains, but will take some time, if ever, to monetize.

Virtualization licenses represents the amount of virtualization platform shipments for a given vendor in a given quarter. New server shipments virtualized maps the amount of virtualization platforms shipments that are sold directly by the hardware vendors. Virtualized server revenue represents the hardware revenue of new server shipments virtualized. Virtualization software revenue represents the software revenue associated with virtualization platform sales.

IDC’s Worldwide Quarterly Server Virtualization Tracker is a quantitative tool for analyzing the global server market on a quarterly basis. The Tracker includes quarterly virtualization license shipments, new server shipments virtualized, virtualized server revenue and virtualization software revenue, segmented by region, cpu type, vendor, form factor, sockets, virtualization platform, and primary guest operating system.

VMware has announced financial results for the third quarter 2009:

• Revenues for the third quarter were $490 million, up 4% from the third quarter of 2008.
• Non-GAAP operating income for the third quarter was $109 million, a decrease of 5% from the third quarter of 2008. GAAP operating income for the third quarter was $23 million, a decrease of 77% from the third quarter of 2008.
• Non-GAAP net income for the third quarter was $95 million, or $0.24 per diluted share, compared to $93 million, or $0.24 per diluted share, for the third quarter of 2008. GAAP net income for the third quarter was $38 million, or $0.09 per diluted share, compared to $83 million, or $0.21 per diluted share, for the third quarter of 2008.
• Cash and cash equivalents as of September 30, 2009 were $2.2 billion, impacted by $356 million used for the acquisition of SpringSource. Total deferred revenues were $990 million. Compared to the same period a year ago, cash increased 29% and deferred revenue increased 27%.
• Non-GAAP operating cash flows for the quarter were $199 million, a decrease of 6% from the third quarter of 2008. GAAP operating cash flows were $199 million, a decrease of 18% from the third quarter of 2008. For the trailing twelve months ended September 30, 2009, non-GAAP operating cash flows were $898 million and GAAP operating cash flows were $975 million.

US revenues for the third quarter declined 1% to $246 million from the third quarter of 2008. International revenues for the third quarter grew 9% to $244 million from the third quarter of 2008.

Services revenues, which include software maintenance and professional services, were $250 million, an increase of 33% from the third quarter of 2008.

Recent Strategic Announcements and Highlights

• VMware hosted over 12,500 attendees and more than 200 sponsors, Aug. 31 through Sept. 3 at VMworld 2009 in San Francisco. As part of the leading virtualization conference, VMware secured new and expanded support from key partners including Platinum sponsors Cisco, Dell, EMC, HP, IBM, Intel, NetApp, Symantec and Wyse.
• In September 2009, VMware announced the vCenter Family of Products, an expanded set of virtualization management solutions including significant new and enhanced offerings meant to dramatically reduce operational expenses.
• September 1, 2009, as part of the VMware vCloud initiative, VMware announced the support of more than 1,000 leading service providers, including AT&T, SAVVIS, Terremark and Verizon Business to deliver cloud services based on VMware vSphere.
• September 16, 2009, VMware announced the completion of the acquisition of SpringSource. Rod Johnson, founder and chief executive officer of SpringSource, serves as General Manager of the new SpringSource division which will focus on providing developers and customers the best experience for developing modern applications.

Use of Non-GAAP Financial Measures

VMware has provided a reconciliation of each non-GAAP financial measure used in this earnings release to the most directly comparable GAAP financial measure. These non-GAAP financial measures, which are used as measures of VMware’s performance, should be considered in addition to, not as a substitute for or in isolation from, measures of VMware’s financial performance prepared in accordance with GAAP. These measures differ from GAAP in that they exclude stock-based compensation, amortization of intangible assets, employer payroll tax on employee stock transactions, acquisition related items, the net effect of the amortization and capitalization of software development costs. VMware’s bases for these adjustments are described below.

VMware’s management uses the non-GAAP financial measures referenced in this release and shown in the accompanying schedules to gain an understanding of VMware’s comparative operating results (when comparing such results with previous periods or forecasts) and its future prospects and excludes the above-listed items from its internal operating plans and measurement of financial performance, including budgeting, calculating bonus payments, and forecasting future periods. These non-GAAP financial measures are used by VMware’s management in their financial and operating decision-making because management believes they reflect VMware’s ongoing business in a manner that allows meaningful period-to-period comparisons. As the non-GAAP financial measures exclude expenses that VMware believes are not reflective of ongoing operating results, management believes the non-GAAP financial measures enable management to better analyze trends in its business. When evaluating the performance of our individual functional groups, VMware does not consider the above-listed items that it excludes from its non-GAAP financial measures. Likewise, VMware excludes such items from its short and long-term operating plans. VMware’s management also believes that these non-GAAP financial measures provide useful information to investors and others (a) in understanding and evaluating VMware’s current operating results and future prospects in the same manner as management does, if they so choose, and (b) an additional basis for comparing in a consistent manner VMware’s current financial results with VMware’s past financial results.

In addition to the foregoing, management believes that these non-GAAP measures are useful to investors and others in assessing VMware’s operating performance due to the following factors:

• Although stock-based compensation is an important aspect of the compensation of VMware’s employees and executives, determining the fair value of the stock-based instruments involves a high degree of judgment and estimation and the expense recorded may bear little resemblance to the actual value realized upon the future exercise or termination of the related stock-based awards. Furthermore, unlike cash compensation, the value of stock-based compensation is determined using a complex formula that incorporates factors, such as market volatility, that are beyond our control. VMware does not believe these non-cash expenses are reflective of ongoing operating results.
• The amount of employer payroll taxes on stock-based compensation is dependent on VMware’s stock price and the timing and size of exercise by employees of their stock options and of vesting in restricted stock, over which management has limited to no control, and as such does not correlate to VMware’s operation of the business.
• VMware’s amortization of intangible assets includes the effects of EMC’s acquisition of VMware in January 2004. Also, VMware does not acquire businesses on a predictable cycle. VMware therefore believes that the presentation of non-GAAP measures that adjust for the amortization of intangible assets and the write-off of in-process research and development, provide investors and others with a consistent basis for comparison across accounting periods and, therefore, are useful to investors and others in helping them to better understand VMware’s operating results and underlying operational trends.

  Acquisition related items include direct costs of acquisitions. Examples of costs directly related to an acquisition include transactions fees and due diligence costs. While we believe it is useful for investors to understand the effects of these items on our total operating expenses, these expenses vary significantly in size and amount and are unique to specific acquisitions and as such are disregarded by management when evaluating the Company’s ongoing operating results. Acquisition related items also includes the gain on the Company’s initial investment in SpringSource Global, Inc., which was remeasured to fair value immediately before the Company’s acquisition of SpringSource. Management excludes the impact of such gains or losses on such investments when evaluating the Company’s ongoing operating results. Excluding the impact of the gain on the Company’s initial investment in SpringSource from the Company’s operating results is also important to facilitate comparisons to prior periods.

• The amortization and capitalization of software development costs can vary significantly depending upon the timing of products reaching technological feasibility and the timing of when products are made generally available. VMware believes that by removing the variance in operating results caused by the net effect of the amortization and capitalization of software development costs, the non-GAAP presentation provides investors and others with a basis similar to that used by management for comparing the level of ongoing research and development expenses and related operational trends across accounting periods.

IBM today introduced new software for managing data centers.

The introduction of IBM’s new VMControl product for enterprises, combined with IBM Tivoli software, gives businesses for the first time a single point of control across multiple types of IT systems and virtualization technologies. It spans UNIX/Linux, mainframe, x86 and storage systems and networks.

VMControl helps companies that have turned to virtualization – the creation of multiple virtual servers or storage on a single physical system – to reduce infrastructure costs, but have encountered new struggles as they try to manage enterprises made up of disparate platforms, each with their own virtualization technology.

VMControl allows combinations of physical and virtual IBM servers to be managed as a single entity. This approach – known as system pooling – expands the benefits of virtualization by helping corporate data centers simplify complex management functions and better share and prioritize use of critical resources such as processing power, memory and storage.

Centralizing control of virtualized environments brings new intelligence to data center operations. Companies can manage their vast pools of information and processing resources and parcel them out to applications when and where they’re needed. This breakthrough capability not only increases the overall capacity utilization of the IT infrastructure to lower capital, operational and energy costs, and improves application availability, but gives IT managers the flexibility to adapt to new demands being prompted by the surge of data from internet-connected devices.

VMControl will also accelerate the deployment of new IT delivery models, like cloud computing, which allows information and processing resources to be tapped from afar.

The new product, together with IBM Tivoli software, helps companies address and improve service and reduce cost and risk. IBM today announced a new version of Tivoli Provisioning Manager that provides enhanced automation of the manual tasks of provisioning and configuring servers, operating systems, middleware, software applications, storage and network devices.

The new product — IBM Systems Director VMControl Enterprise Edition — supports IBM’s PowerVM and z/VM as well as x86 virtualization technologies such as VMWare, Hyper-V and open x86 virtualization solutions. VMControl Enterprise Edition will be available on IBM Power Systems running AIX in December, 2009.

Additional support for other platforms is planned for next year as part of a dynamic infrastructure.