B, this is nothing to do with trying to recover VMware’s share price - it’s much to big a decision to make based on the flippance of the stock-market - and beside which A caused B, and therefore the order events would be illogical if A is true.

C. Is VMware is running scarred of Microsoft? Well, I wouldn’t use running scared but quite clearly, making the hypervisor free kinda of puts the spanners in the works for Microsoft HyperV. Not only is ESX better, its now free. Perhaps this will prompt MS to give away W2K8 Server Core for nothing? Of course, I’m joking!

D. This is a stab at the SMB market. Yes, it is but - I doubt VirtualCenter will be free - and without a legitatmate management tool the new offering will be little limited. There’s no solid information on VMware position. I’m guessing. Is this a problem. VirtualCenter for management only isn’t too expensive, and VMware will try to upsell the SMB to advanced features - using the free hypervisor as a foot-in-the-door strategy. Additionally, there are some ESX managers that are “free” such as HP VMM and IBM VMM…

Scott Lowe : First, I’m not surprised. Informal discussions I’d had with various VMware resources had hinted that this was on the way; besides, it’s the natural response to a major competitor who is, for all intents and purposes, releasing their product for free. So this move isn’t surprising in the least.

Second, I would be surprised if this was only Maritz’ doing. I suspect that Diane Greene had this plan in the works for months before her sudden departure. Seems like I saw mention somewhere of a confirmation of this, but I can’t find it now. If anyone knows of such a confirmation, I’d appreciate a link in the comments.

Third, you have to remember that VMware is only releasing ESXi for free. They’re not releasing VirtualCenter for free. You’ll still need VirtualCenter and VI3 Enterprise licenses in order to do stuff like VMotion, Storage VMotion, VMware DRS, VMware HA, VMware DPM, etc. Just like Microsoft, whose System Center Virtual Machine Manager and the rest of the System Center suite will be “paid-for” products, VMware will continue to charge for VirtualCenter. However, keep in mind that the APIs that VirtualCenter uses are widely available, so there’s nothing stopping anyone from writing their own free (perhaps open source?) replacement for VirtualCenter. Somehow, I can’t see that happening with SCVMM or any of the other members of the System Center suite.

This move makes ESXi the “gateway drug” (pardon the comparison) to full-blown VMware Infrastructure. Get the light stuff for free and get you hooked, then charge you for the heavy stuff. It’s a tried-and-true practice that almost every software vendor out there uses. In my opinion, the arrival of this model to the virtualization market is merely another indicator of the market’s maturity. This move will begin to shake out the virtualization wannabes who don’t have the strength or stamina to duke it out with the bigger players.

Alessandro Perilli: At first sight this move seems a clear attempt to recover the terrible stock performance that VMware is suffering from the departure of its former CEO Diane Greene.
But virtualization.info has learned that the plan was not developed by the new CEO Paul Maritz, but by Greene herself several months ago.

How the free ESX will impact the market?

First of all, the competition will move on the virtual infrastructure management (with a special focus on the storage) and automation (for hosted desktops, virtual labs, VM lifecycle, autonomous computing, cloud computing) areas, turning the hypervisor as a commodity, embedded in the operating system or not.
Any vendor that will not adopt the same strategy (like Citrix or Virtual Iron) will have a hard time to justify the price of its solution.

Secondarily, the product will finally boost the diffusion of VMware technologies in the SMB market.
This will seriously disturb the Microsoft effort in this space and all the other virtualization vendors that have a clear focus on the small companies (like Virtual Iron or Parallels).

Last but not least, the sales channel will become critical to win the competition for most customers.
When multiple market leaders have a similar proposition in terms of price and feature set, the experience in managing the channel does the real difference.
VMware didn’t seem able to compete with Microsoft and Citrix here, but the new CEO certainly has the knowledge to correct the mistakes of the past.