Oracle Corp. made a move yesterday to take on VMware Inc. in the market for virtualization software, unveiling a product that it says is three times more efficient than competitors' offerings.
VMware shares fell more than 8 percent after executives at Oracle, the world's second-largest software maker, demonstrated the product before thousands of customers at a conference in San Francisco.
Customers can download "Oracle VM" for free starting tomorrow, the company said. Oracle will sell service contracts for the product ranging from $499 to $999 per year.
Virtualization software allows companies to save costs by squeezing more resources out of each computer, helping businesses save on electricity, space in data centers, maintenance fees, and other expenses.
That market is now dominated by VMware, an affiliate of Hopkinton-based EMC Corp.
"Is this bad news for VMware? Yes," said Trip Chowdhry, an analyst with Global Equities Research. "This tells us that the virtualization 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 percent 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 fell $7.38 to $80.36 on the New York Stock Exchange, but it remains far above its initial public offering price of $29 a share.
EMC shares were down $1.08, or 5.4 percent, to $18.83. Oracle shares closed up eight cents, or 0.41 percent, to $19.44.
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 running the software, according to its website.
Microsoft Corp., Red Hat Inc., Novell Inc., and Citrix Systems Inc. also sell virtualization software, though the functions are more limited than those of VMware products.
