Virtualization leader VMware is feeling the Microsoft effect. In hopes of countering the demand for Microsoft's $28 Hyper-V hypervisor Windows Server 2008 plug-in, VMware has just announced that it will change the price on its competing ESXi hypervisor on July 28 from $495 to $0. Over the last several months, VMware has had to deal with the ouster of CEO Diane Greene, installing new CEO Paul Maritz, disappointment on Wall Street over lower-than-expected quarterlies, and complaints that the company's prices are on the high side. In fact, earlier this month, VMware announced prices for products and subscriptions would be raised by 10 percent for customers in Europe, Australia and New Zealand, beginning in September. The change was pegged to currency volatility, says Virtualization.info. (To be clear, VMware is certainly not alone in raising prices.)

Making ESXi free is a play to encourage new customers to give VMware's hypervisor a try and make VMware their trusted source for more sophisticated, high-ticket software once they become hooked.

As the new CEO, Maritz says he will use his inside knowledge of Microsoft to his company's advantage, and that he believes having a market lead is invaluable in battling "formidable" Microsoft. Tuesday, he told Tech Trader News that VMware, as a $2 billion tech company growing at 40 percent or more, travels with SAP and Microsoft -- and that's about it. Maritz also believes that the large, multi-year, multi-license deals that VMware has pursued for the last couple of years were important strategically, but may cause revenue uncertainty. The company has officially slowed its growth forecast, based in part on this licensing uncertainty and larger economic conditions that are expected to affect tech spending in general, says the Financial Times.

Maritz, who some say was brought from EMC to VMware as the new CEO precisely to spearhead the virtualization battle with Microsoft, only took about two weeks to deflate part of the argument for sticking with Microsoft's Hyper-V on all those Windows servers, now that customers can opt for the more feature-rich ESXi for free and pay for just the management software layer.