Tucci Basking in Glow of VMware Bet—And Says Competitors Are Way Behind

Joe Tucci loves virtualization. And why wouldn’t he? Tucci is CEO of EMC (NYSE: EMC), which produced this year’s hottest IPO when it offered 10 percent of its virtualization subsidiary VMware (NYSE: VMW) for public sale, netting the company billions (at least on paper) in the process. But at an analysts’ conference yesterday at Boston’s Museum of Science, Tucci revealed more of his passion for virtualization. Since I walked over to the meeting almost at the exact moment Wade was posting about VMware facing stiffer competition, we thought it would be nice to present a bit more from Tucci’s point of view.

It’s a love story, underneath it all. Indeed, Tucci said his love for virtualization goes way back, and that he’s been a bit surprised by virtualization’s power and strength. And despite the growing wave of competition and some doubts among observers (as reflected in Wade’s story), Tucci feels, like many of our readers, that his rivals are way behind. VMware’s position, he stated, gives EMC “better than any other company in the world coverage on the virtualization front.”

He touched on some of the reasons for that confidence. But first the story of love blossoming. Tucci told yesterday’s audience that he swooned over virtualization back around 2003, when the reason for his infatuation was far harder to understand than it is today. At the time, VMware’s big product was a program that allowed desktop machines to run multiple operating systems such as Windows, Linux, and Novell Netware simultaneously. But Tucci presumably could see the potential for the whole enterprise IT infrastructure. “I fell in love with this technology,” is the way he put it. Now, as a CEO, he added, “You should never fall in love with anything, because it means you gotta have it and you’ll pay anything for it.” Not a good place to be.

In this case, he acknowledged with a smile, it “worked out rather well.” EMC bought VMware at the end of 2003 for $635 million. Did he think virtualization would be a billion-dollar market back then? Yes, he did, Tucci related. “Did I think it was going to be this big, this fast? No. It surpassed our highest expectations.”

So what does Tucci see as the basis for VMware’s success? “One of the reasons why VMware is so viral and has such great growth is because of its breadth and depth,” he said. This is reflected in the technology’s ability to support virtually any operating system than runs on Intel x86 and for it to work on mobile and desktop platforms as well as servers. “This is a true platform, and this is what differentiates it from others,” he said.

Other companies offering virtualization technology, he felt, trail far behind. That list, though he didn’t name names, includes Oracle, Virtual Iron, SWSoft, Qumranet, Citrix (through its recent acquisition of XenSource) and, by next year, Microsoft. Competitors are still on their first versions of things, while VMware is on version 3.0, Tucci said. “This thing will basically, before the others get traction, be at version 4,” he said. (And for the moment, that seems to mean that VMware can charge accordingly. The standard edition of the company’s server virtualization starts at $2,995 per copy, while Virtual Iron’s equivalent product costs $998 for a standard dual-core processor).

And what about the future? Tucci reminded the audience that EMC still owns 86 percent of VMware’s stock—and 98 percent of its voting shares. And, he implied, it’s going to stay that way, no matter how tempting it might be to sell off more. “I do not have any intention of selling the rest of VMware,” Tucci said.

That sure sounds like true love. I’ll be curious to see how long it lasts.

Bob is Xconomy's founder and chairman. You can email him at bbuderi@xconomy.com. Follow @bbuderi

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