VMware Inc. (VMW)

Hewlett-Packard (HPQ) and VMWare (VMW) announced a deeper product collaboration going forward, offering to enterprises and service providers a single management and control approach to both physical and virtual software infrastructure stacks.

Both the HP Discovery and Dependency Mapping products and HP Universal CMDB configuration data management suite will aid in discovery of virtualized environments for improved tracking and reporting of changes in VMWare virtualized envrionments.

And HP's Business Service Automation capabilities -- including HP Server Automation Center, HP Client Automation and HP Operations Orchestration -- will assist in the oversight and operational upkeep of services running in VMWare-supported virtual infrastructure instances.

HP and VMWare did not unveil any financial partnership news, but the two certainly seem chummy these days. HP clearly sees a huge market opportunity for helping to manage the complexity of virtualized platforms, given the need for enterprises to cut total costs through higher hardware utilization and the ability to dynamically and automatically match computer power supply with applications and storage demand.

The two companies did outline bundling and packaging of their products, in that new software bundles will combine VMware's Infrastructure 3 software suite with the HP Insight Control Environment for additional automation benefits. The goal, said the companies, is to provide a "comprehensive and seamless physical and virtual platform management" capability set.

“We’re expanding our relationship with VMware to jointly develop solutions that provide customers with comprehensive management of virtualized business applications running on the VMware platform,” said Ben Horowitz, vice president and general manager, of HP's Business Technology Optimization software, in a release.

First mover advantage in high growth virtualization market. VMware seems to be strengthening its domination over this market. So far this year, VMware’s share has risen 12-percentage points. None of the other major competitors have exhibited anything like this explosive growth, although Citrix Systems (26%; up 5-pts) has also shown a jump in current share.

Looking at planned corporate software purchases over the next 6 months, VMware (73%; down 3-pts) towers over the rest of the market, with better than a four-fold lead over its closest competitors. But once again, Citrix (15%; up 8-pts) is showing momentum going forward.

Thus, in a depressed corporate spending environment, Virtualization is one of the only software spaces showing an increase in purchasing going forward. After a precipitous fall in the 1st Quarter, VMware’s stock price has rebounded as much as 66% in the past few weeks.

Not only does VMware have first mover advantage, it's still light years ahead of its competition in technological terms. Virtualization has gone beyond the hypervisor (ability to run multiple virtual machines on a single host as it was multiple hosts, thereby saving costs in hardware, energy, real estate, etc). VMware has multiple technologies that have yet to been copied. Today, most companies in most industries trust their IT infrastructure on VMware. Would you trust yours on one that's any less mature? Microsoft is on version 1. Xen's comes from a free and open source version that has lost most of it's passionate, original developers and it's been split up 5 different ways - Sun, Citrix, Red Hat, and Oracle (none of which specialize in Virtualization) all have driven the same product in different directions.

Technology support from the heavy hitter techs (INTC, CSCO, EMC) may help spur additional growth.

Technology support from the heavy hitter techs (INTC, CSCO, EMC) may help spur additional growth.

Tremendous revenue growth and profit growth in 2006 (~100%).