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Why Microsoft’s Partnership with VMware Is a Big Deal for PCs

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Microsoft and VMware closely compete in server virtualization space

Previously in this series, we discussed Microsoft Corporation’s (MSFT) partnership with VMware (VMW) with Project A2, in an effort to accelerate the adoption of its recent operating system, Windows10. With Project A2, both companies hope to ease the standardization of PC applications, as well as the applications on tablets and smartphones.

In the technology industry, it’s relatively common for companies to enter into partnerships and agreements in order to promote their products, enhance technology, and expand end markets. However, when two companies are vying and competing for the same market, a partnership between them certainly raises a few eyebrows. This is what had happened when Microsoft (MSFT) and VMware (VMW) announced their partnership on September 1, 2015.

VMware generates the majority of its revenues from server virtualization that allows a single server to run a plethora of varied operating systems and applications. Its rising popularity urged Microsoft to think about its Windows servers.

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As the Gartner’s Magic Quadrant above shows, both are “Leaders” and compete closely in this space. While VMware dominates this space, Microsoft gains on the price as once a user buys Windows Server Datacenter Edition to run on their servers, they get unlimited virtualization, as Hyper-V is included in the price.

VMware’s Identity Manager competes with Microsoft’s Active Directory

In June 2015, VMware announced its plans to support Apple (AAPL) and its iOS platform in enterprises. It also launched VMware Identity Manager, a cloud service, as a part of this announcement in order to help companies manage their passwords.

VMware’s biggest acquisition to date of AirWatch—for $1.5 billion in 2014—was thus a strategic push in this regard. Microsoft claims that approximately 95% of businesses around the world use its Active Directory for password and identity management.

Both VMware and Microsoft target the software “virtualization” market for computer servers. Microsoft even has device-management software that competes directly with AirWatch. For this reason, Microsoft’s partnership with VMware is a big deal—not just for PCs but for the operating system market in general.

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