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BOSTON - Oracle made a move on Monday to take on VMWare in the market for virtualisation software, unveiling a product that it says is three times more efficient than competitors' offerings.
VMware shares fell more than 6 per cent after executives at Oracle, the world's second-largest software maker, demonstrated the product before thousands of customers at a conference in San Francisco. Oracle shares rose over 2 per cent.
Customers can download "Oracle VM" for free starting on Wednesday, the company said.
Oracle will sell service contracts for the product ranging from $US499 to $999 per year.
Virtualisation software allows companies to save costs by squeezing more resources out of each computer, helping businesses save on electricity, space in data centres, maintenance fees and other expenses.
That market is now dominated by VMware, an affiliate of EMC Corp.
"Is this bad news for VMware? Yes," said Trip Chowdhry, an analyst with Global Equities Research. "This tells us that the virtualisation market will not belong to VMware. One of the players will be Oracle. Until today that news has not been factored into the stock price."
VMware could not immediately be reached for comment.
It went public in August in what was the hottest technology initial public offering in years. VMware, which is still 86 per cent owned by EMC, has a market value of about $34 billion, making it the fourth-largest publicly held software maker in the world.
The stock was trading down 6.7 per cent at $81.89 late in the session, after falling as low as $81.50 earlier in the day on the New York Stock Exchange, but it remains far above its IPO price of $29 a share.
EMC shares were down 4.5 per cent to $19.02.
Oracle shares were up 2.1 per cent to $19.77.
Oracle's services contracts cover updates, bug fixes and other support services and will cost either $499 or $999 per year, depending on the type of computer that is running the software, according to its website, www.oracle.com/virtualization.
Microsoft, Red Hat, Novell and Citrix Systems also sell virtualisation software, though the functions are more limited than those of VMware products.
- REUTERS
