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Today Bob Muglia, president of Microsoft’s key server and tools division, and a member of the inner circle that includes Steve Ballmer and Bill Gates, told Bank of America Merrill Lynch analysts during a technology conference that, in contrast to previous economic recoveries, “we’re not expecting to see massive growth coming out of this [recession].”

I’ve said previously that Microsoft may be hiding poor management decisions behind the economy’s skirts, but Muglia’s comments made me realize that Microsoft is actually pinning its hopes for growth on tough times. As Muglia responded to questions from BoA-ML analysts, the overarching theme that emerged was, “we’re less expensive than the other guy,” whether the other guy in question is VMware, Salesforce, IBM, or Oracle.

  • Muglia said improvements Microsoft is making to its virtualization technology (to be released in October) will force server virtualization market leader VMware to “move to higher and higher end features to differentiate [itself].” Muglia noted that while virtualization software helps customers lower the cost of running servers, Microsoft is “now three to five times less expensive than VMware” running the same kind of technology. “The cost differential between Microsoft and VMware is so dramatic that every CIO” will have to take that into consideration.
  • because Microsoft is the underdog in this market, it offers system tools that manage both VMware and Microsoft virtualization technology, further lowering the cost of working with Microsoft software. “Microsoft is the cross-platform vendor here. [VMware] doesn’t manage [Microsoft’s] Hyper-V” virtualization tools. As a result, he said, “Now, every single day that goes by, we are gaining share against VMware.”

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