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Worldwide Virtualization Market Opportunity

According to IDC, worldwide virtualization license shipments in the second quarter of 2008 (2Q08) increased 53 percent year-over-year, compared to a 72 percent year-over-year increase the previous quarter.

The x86 server market led the way with 60 percent year-over-year growth followed by the EPIC server market with 18 percent growth. Worldwide CISC and RISC server virtualization licenses declined 15 percent and 7 percent year over year, respectively.

"Quarterly totals of x86 server virtualization licenses continue to experience healthy growth, although the growth rates have slowed over the last four quarters. The modest decline in growth rates indicates that the market is showing early signs of maturation," said Brett Waldman, research analyst for System Software at IDC.

Based on our conversations with end users, IDC believes that the high-volume consolidation opportunities -- the low hanging fruit in the x86 server virtualization market -- is starting to dry up. This is, in turn, resulting in smaller deals overall.

The virtualization platform providers are going to have to adapt their go-to-market strategies to this ever-changing dynamic, as new growth opportunities open up around new deployment of virtualized servers not specifically targeted at consolidation, and at new customer segments such as midsized companies.

Worldwide new server shipments virtualized increased 52 percent year over year in the second quarter, compared to 70 percent growth in 1Q08.

Worldwide virtualization software revenue grew 15 percent year over year in 2Q08, compared to 32 percent growth in the first quarter of 2008. The growth in virtualization software revenue primarily came from the x86 server market, which grew 39 percent year over year.

EPIC virtualization software revenue also increased year over year, albeit at a slower pace of 9 percent.

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