With V-Block, clients can build “private clouds” from which to draw computing resources. It’s an ambitious effort designed to capture a bigger piece of the IT infrastructure market by offering large unified systems designed to handle most of a business’s computing needs. As Cisco CEO John Chambers noted earlier today, the goal here is to more effectively target the market for cloud infrastructure and services, a market that could be worth as much as $350 billion.

It’s also a market loaded with with fierce competitors, IBM (IBM) and Hewlett-Packard (HPQ) among them. Not that this worries Chambers much. “Will this change the industry?” he asked during a conference call today. “Time will tell. I believe that it will be the partnership that people will look back on and say it changed the data center and clouds forever.”

On Thursday, the virtualization software firm reported a second-quarter profit of 20 cents a share, topping the 19 cents projected by analysts. And while sales fell to $455.7 million, they still exceeded the $452.4 million the Street had been expecting.

In a conference call with analysts, VMware (VMW) execs warned not to read to much into that though, saying they are still cautious about the economy.

“It is clear the global economy has not yet recovered and there is still some uncertainty,” CEO Paul Maritz cautioned. “In a recent survey of 150 CIOs of large businesses, 40 percent expected some downward revision in their budgets in the second half of 2009. That said, there were some signs that customers were moving on with business, even if it was buying just enough just in time.”

“Prior to joining Google, I set up a meeting on or about November 11, 2004 with Microsoft’s CEO Steve Ballmer to discuss my planned departure….At some point in the conversation Mr. Ballmer said: ‘Just tell me it’s not Google.’ I told him it was Google. At that point, Mr. Ballmer picked up a chair and threw it across the room hitting a table in his office.”

- Former Microsoft Distinguished Engineer Mark Lucovsky

“I’ve never thrown a chair in my life….By and large I made a commitment nine years ago that I was not going to curse. I know I’ve had one or two transgressions in nine years, but I made that commitment to myself. Is that one of them? I don’t recall.”
– Microsoft CEO Steve Ballmer

The rumors are true. Mark Lucovsky, the engineer whose departure from Microsoft (MSFT) allegedly sent CEO Steve Ballmer into a paroxysm of profanity and chair-tossing, has left Google (GOOG) for a new position at VMware (VMW), the company has confirmed.

Lucovsky, once a Microsoft Distinguished Engineer and a key architect of Windows and the company’s ill-starred Dot-Net strategy, was hired away by Google in 2004. Now, five years later, he has unceremoniously left the search sovereign for a senior engineer position at VMware. There, he’ll be reunited with Paul Maritz, president and CEO of VMware, who once served as Vice President of the Platform Strategy and Developer Group at Microsoft.

“As one of the founders and the leader of VMware, Diane guided the creation and development of a company that is changing the way that people think about computing,” Joe Tucci, Chairman of VMware’s board, said in a statement. “The board thanks her for her considerable contributions to VMware and wishes her every success in the future.”

VMware offered no reason for Greene’s departure, though presumably it has something to do with the company’s lowered guidance. The company’s stock tanked on the news, falling more than 30 percent to $36.97, taking billions of dollars of shareholder wealth with it. Truly an ugly decline for a company that launched the biggest technology IPO since Google went public in 2004. Since hitting a 52-week high of $125.25 last October, shares VMware have shed nearly 70 percent of their value.

The stomach-curdling nosedive eradicated about $10 billion in shareholder wealth and dragged VMware’s parent company EMC into the mud as well. The company, which spun off VMware last summer and remains its largest stakeholder, saw its shares slip 6%, though it just reported a strong quarter itself.

Perhaps VMware, which has been lauded as one of the best tech offerings in recent history, is overvalued after all. The company is facing increased competition from powerful rivals. “If you miss your numbers in just your second quarter after going public, that suggests the stock was overhyped,” Trip Chowdhry, an analyst at Global Equities Research, told Reuters. “The story is not as perfect as investors believe. Oracle and Microsoft and Citrix have spoiled VMware’s party.”

Perhaps. But if it’s not, the sudden decline in VMW could present a nice investment opportunity. “Here’s your buy-in discount,” says the Motley Fool. “Enjoy it while you can. It took 10 weeks for VMware’s stock to go from a 52-week low of $51.50 per share to the high-water mark at $125.25. It can happen again, so don’t get caught flat-footed.”

Like any network switch, the Nexus 7000 controls and directs the flow of data between connected computers. But unlike any network switch, it can transfer data at 15 terabits per second, which–depending on whatever silly illustrative metric you prefer–is fast enough to either:

• copy all the searchable Web in less than eight minutes;
• download Wikipedia’s database in 10 milliseconds;
• download 90,000 Netflix movies in less than 40 seconds;
• run 5 million concurrent high-quality videoconferences between New York and San Francisco;
• or send a two-megapixel digital photograph of CEO John Chambers to every human being on earth in 28 minutes.

The company claims it can, anyway. “It isn’t often you get to do a clean-sheet design of a system, and that is what we have done over the past four years,” Doug Gourlay, senior director of marketing in the Data Center Solutions unit at Cisco, told SearchDataCenter.com. “The Nexus series is analogous to the Toyota creating the Prius; we have created a new class of data-center switching. We made Ethernet lossless.”

Neat.

For Cisco, which is pushing to increase its presence in the data center and virtualization markets, the Nexus 7000 could be a big winner. “If it works, Cisco would mark off a hugely strategic niche for itself, as a kind of king of virtualization,” Peter Burrows writes in BusinessWeek. “That’s the name of a technology that’s risen to prominence in recent years within pockets of the data center. VMWare, for example, has become corporate tech’s new darling, thanks to software that lets companies spread work among all of their available servers, rather than have them sit idle waiting for their particular job to be called. In storage, gear from companies like Brocade plays a similar role. But until now, no company has figured out a way to easily coordinate these various pools of virtualized gear.”

Why is Dell so hot for a six-year-old company that, according to papers filed with the U.S. Securities and Exchange Commission in August, made just $68 million in revenue last year and has never been profitable? Well, for one thing, EqualLogic is maker of iSCSI storage-area network virtualization technology–the fastest-growing part of the storage business.

For another, shares of VMware–the current leader of the storage business–have quadrupled since the company went public nearly three months ago (in August EqualLogic filed to go public, something it now won’t have to do).

Finally, it makes Dell more of an enterprise company and less of a box builder. Which is likely a good idea for a company that ranks near the bottom of the American Customer Satisfaction Index’s annual rankings of personal-computer makers.

Five hundred million dollars. Quite a sum–especially when XenSource is burning through $15 million a year in expenses, but generating just “a few million in revenues,” according to Citrix CFO David Henshall.

That said, Citrix expects the server- and desktop-virtualization market to balloon to $5 billion by 2011, and this acquisition will put it in a good position to carve itself a piece. Said Peter Levine, CEO of XenSource: “This move is not about competing for the 5% of the market that is already being served. It’s about steering into the 90% white space that is wide open, both at the server and in new emerging opportunities at the desktop.”

Course, that space won’t be wide open for long. Microsoft is belatedly developing its own virtualization product called Viridian. And when it finally debuts the virtualization land grab will really begin. As the research outfit 451 Group told its clients: “The virtualization market now revolves around three players: market darling VMware; Citrix’s combination of young blood and old money; and the (potential) threat of Microsoft’s Viridian, slated to ship in Q3 2008. Both Citrix and VMware have a 12-month window of opportunity before Microsoft shows its full hand.”

Little wonder the underwriters of VMware’s IPO exercised their overallotment option to purchase an additional 4,950,000 of the company’s shares.

The company’s performance yesterday “tells you that even in a market where stocks are selling off and investors have a negative view, that VMware stands out as a stock to own,” said Jefferies & Co. analyst Katherine Egbert. “The company is on a trajectory that mirrors Microsoft, Oracle and Veritas in the early days.”

Sure. But for how long? After all, VMWare may be best in breed, but it’s best in breed with limited competition. “Basically, for the last five to six years, VMware has had no competition,” Tom Bittman, a vice president and chief of research at Gartner, told eWeek. “The first real competition came when you had vendors developing Xen, open-source products, and then you are going to have Microsoft’s Viridian in beta later this year. I think Microsoft’s product is going to be a serious competitor to VMware, and Microsoft has also really improved its management technology.”