Virtual Iron: Acquisition Target?

Industry analyst Mann says he believes Virtual Iron’s claim that its virtualization solution is better than Microsoft’s, and that it’s (roughly) comparable to VMware without the cost and complexity.

“That’s probably a reasonable statement in actual fact,” he says.

Moreover, Virtual Iron has probably been smart to focus on the SMB market, he says, especially given the competition from heavyweights VMware and Citrix.

Yet that won’t insulate the small vendor from Microsoft. The problem for Virtual Iron is that Redmond is delaying the market. For longtime Windows shops, Microsoft’s claim that it now has a hypervisor with management capability – with missing pieces on the way – is tempting.

“So some of these companies are potentially holding off until it delivers some of this stuff,” Mann notes. “So that’s going to stall some people.”

“Where things will get even more difficult for Virtual Iron now is against [Microsoft] Hyper-V,” Mann says. “Obviously Microsoft has a very strong presence in small and medium business, as well as in large enterprise.” In short, there’s no place for Virtual Iron to hide.

“There is the possibility of having success in specific verticals, in specific segments. Virtual Iron is looking for the SMB segment. [Virtualization vendor] Parallels is looking in the service provider market. There is room to be a niche player here. But as the market gets crowded by Microsoft, VMware and Citrix, that niche capability gets less acceptable – and they need to be part of some bigger picture.”

Yet it’s this possibility of being part of something bigger that offers a lucrative ray of hope for Virtual Iron, Mann says. The company makes a tempting acquisition target.

“I can think of half a dozen vendors in software and hardware who might want to have Virtual Iron in their portfolio,” he says. A player along the lines of IBM or HP might want to scoop up the company.

In the mean time, the virtualization market is a growth story amid generally sagging budgets. Perhaps the hefty growth will expand the customer base enough for all (or most) of the players.

Indeed, it’s early in the game. “The industry analyst, and some of the vendors and the press, I think they tend to overstate how quickly these trends are adopted,” Olds says.

“The majority of customer are using virtualization to some extent, but in x86 a lot of them are still kicking the tires and using it in places that are kind of the low hanging fruit, like testing and development. Some will point to using it in production for mission critical, but my sense is that customers aren’t quite there yet, and it’s going to take years to get to that point.”