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I'm running a project at the moment that requires me to install VMWare server on one of our spare servers.... and consolidate some of our older machines, that aren't so "critical"

I was just wondering if Ubuntu Server was a good OS to install VMWare server on? Is it possible to have Windows VM's hosted within this?

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From the documentation

Linux Host Operating System

Requirements ... 
Ubuntu Linux 8.04
Ubuntu Linux 7.10 
Ubuntu Linux 7.04
Ubuntu Linux 6.10
Ubuntu Linux 6.06
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the answer is yes on both questions

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Yes and yes. :) Last I check, VMware is supported on Ubuntu. And you can run Windows on VMware.

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Quasi-unrelated but I suggest you look at VMware ESXi before VMware Server; you'll find the performance to be orders of magnitude better.

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