The report was very inaccurate, the prices weren't correct, and they compared apples to oranges. The whole post is worth reading.

VMware's reply.
http://blogs.vmware.com/virtualreality/2008/02/those-darn-de-1.html

Yankee Group recently came out with a report “Virtualization Price War: VMware’s Little Big Horn?” that unfortunately contained quite a few factual errors, inaccuracies, and unsupported claims. The report was not reviewed with VMware prior to publication (as some have claimed). Therefore, VMware is listing the factual errors and inaccuracies in the report because they distort the true cost and value of VMware's solution. Happy reading.

1. Exhibit 2: Double counting, omissions, and other issues

Exhibit 2 indiscriminately mixes VMware's bundle and ala carte pricing, making it very difficult for readers to get an actual apples-to-apples cost comparison. If the table is meant to be a cumulative account of Microsoft and VMware pricing (i.e. add up all the rows), then there is significant double-counting in the VMware column. If the rows in the table are meant to be interpreted individually, then there are gross inconsistencies between how VMware and Microsoft's costs are shown. Most casual readers will assume the table represents cumulative cost for both companies since they see the word "Included" throughout Microsoft's column.