By Jim Finkle
BOSTON (Reuters) - Microsoft Corp said on Thursday it has 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. Yankee Group analyst Laura DiDio said that a comparable VMware product costs $7,000 to $14,000, depending on how many processors the server has, though she notes that VMware's software has more advanced functionality in some key areas.
"The price difference is jaw-dropping," said Jefferies & Co. analyst Katherine Egbert. "I think that will cause a lot of people to at least consider Hyper-V."
Customers of Microsoft, the world's biggest software maker, can start downloading the product from its website on Thursday, the company said. Microsoft had previously said it would make the product available in August.
VMware shares fell 4.25 percent to $59.58 in afternoon trading on the Nasdaq. Microsoft shares were down 1.31 percent at $27.98.
Officials for VMware were not immediately available for comment.
Analysts said that customers who decide to stick with VMware will have increased bargaining power due to Microsoft's lower price.
"I always tell companies to press very hard on pricing when negotiating with all software companies," DiDio said. "It's a buyer's market."
Nucleus Research analyst Rebecca Wettemann said that she thinks Microsoft would be a credible competitor to VMware.
"Microsoft has to be taken very seriously because of its size. Microsoft is going to make inroads," she said.
VMware controls the vast majority of the server virtualization software market. The company is 86 percent-owned by EMC Corp.
Other companies that compete with VMware include Citrix Systems Inc., Oracle Corp, and two privately held companies - Virtual Iron and Parallels.
(Reporting by Jim Finkle; Editing by Derek Caney and Dave Zimmerman)
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