VMware profits slump but Gartner predicts growth

Small firms started late on virtualisation, but are set to catch up soon

Virtualisation giant VMware's year-on-year profits fell by more than half in the third quarter, but analyst firm Gartner is predicting strong growth in the industry, to the point where 50 per cent of x86 server workloads are virtual by the end of 2012.

VMware's profits slid by 54 per cent over the period, while net income fell to $38m (£23m) from $83m (£50m) a year ago, according to its Q3 results posted yesterday.

However, it was not all doom and gloom for the firm as year-on-year revenues rose four per cent to $490m (£296m).

At the same time, Gartner predicted that demand among smaller businesses is likely to spur rapid growth in virtualisation over the next three years, despite admitting that only 16 per cent of workloads are running in virtual machines today.

"While large organisations were quick to leverage virtual machines to reduce server sprawl and power costs, as well as conserve datacentre space, small business started late on virtualisation," said Tom Bittman, distinguished analyst at Gartner.

"However, by year-end 2010, businesses with 100-999 employees will have a higher penetration of virtual machines deployed than the Global 500. For years the entry point was simply too high for small businesses, but increased competition by server vendors has enabled smaller firms to embrace virtualisation."

Gartner said that approximately 58 million deployed machines will be running some form of virtualisation by 2012.