IDC: Virtualization Rocked by Recession

NEW YORK (TheStreet) -- Despite impressive third-quarter results from VMware(VMW Quote), the virtualization market is still reeling from the effects of the recession, according to the latest research from analyst firm IDC.

VMware, a virtualization trailblazer and analyst darling, blew past Wall Street's estimates last week, boosted by strong U.S. government sales. IDC, however, warns that the broader virtualization market has taken a hit during the economic downturn as firms tighten their spending on server hardware.

Just over 16% of new servers shipped during the second quarter were virtualized, according to the firm's research, up from 14.5% in the same period last year. Actual server shipments, however, fell 21% to 246,000, and virtualization software revenue dipped 18.7% to $344 million.

Virtualization, which lets users divide physical hardware into multiple "virtual" chunks, has become popular among users looking to juggle myriad of operating systems and applications. With companies also struggling with budget pressures, VMware and its rivals are pushing virtualization as a way for firms to reduce the amount of server and storage hardware within their data centers.

Oracle(ORCL Quote), for example, snapped up virtualization specialist Virtual Iron earlier this year, and Citrix(CTXS Quote) recently teamed up with Microsoft(MSFT Quote) in an attempt to challenge VMware.

Even in a slowly recovering economy, there are still plenty of positives for virtualization, which is widely regarded as one of the hottest technologies of recent years. Virtualization licenses, for example, grew sequentially in the second quarter, according to IDC.

"We believe that virtualization will be a cornerstone technology as medium and large enterprise organizations around the globe accelerate the need for more dynamic and converged infrastructure," said Matt Eastwood, IDC group vice president, in a statement.