Microsoft starts selling rival to VMware programs

By Jim Finkle

BOSTON (Reuters) - Microsoft Corp said on Thursday it started selling its new server virtualization software about six weeks ahead of schedule, putting pressure on market leader VMware Inc.

Server virtualization software allows one machine to perform the work of multiple servers, letting companies save money on equipment, electricity, maintenance and other costs.

Microsoft says it charges $28 per server for its software, dubbed Hyper-V, which was put up on its website for download on Thursday. The company previously said it would make the product available in August.

VMware said it charges $495 for the most comparable software in its product line, which is known as ESXi.

"I think this is going to put some pricing pressure on VMware," said Illuminata analyst Gordon Haff.

Haff considered Hyper-V's functionality to be more robust than the $495 VMware ESXi program and said Microsoft's software was more comparable to products in VMWare's ESX family, which start at $1,000 and run as high as $5,750.

VMware shares fell 5.24 percent to close at $58.92 on the Nasdaq. Microsoft shares fell 2.12 percent to $27.75.

Analysts said customers who decide to stick with VMware will have increased bargaining power due to Microsoft's lower price.