Citrix Acquires XenSource For $500M

The virtualization market got another shot in the arm one day after the blockbuster VMware IPO, with the $500 million dollar acquisition of virtualization vendor XenSource by Citrix (Quote).

The acquisition is expected to close in the fourth quarter of 2007 and
includes a combination of cash and stock. XenSource only has 650
paying customers, but the idea with acquisition is that XenSource’s products
will get wider distribution through the Citrix sales channel.

“One of the dream channels for us is the Citrix channel,” XenSource CEO Peter Levine said on a morning conference call. “All our partners carry
it [Citrix] now and a lot wanted to create server virtualization practices.

“I’d expect that most of the Citrix channel is appropriate for the products
we have; it’s something we think will light up the availability of our
products around the world.”

XenSource builds commercial virtualization technologies that build off the
Xen open source hypervisor project that is backed by IBM, Red Hat, Novell
and others. Earlier this week XenSource launched its XenEnteprise version 4, which expands the platform with more features in a
competitive play against VMware.

Though XenSource may only have 650 paying customers today, Levine was quick
to note that the number of customers has been doubling quarter over quarter
and the release of XenEnterprise v4 is expected to accelerate that growth.

Levine said that there are “tens of thousands” of users for the free
XenExpress product. Those users have been waiting for the enterprise
features in the latest XenEnterprise release, and Levine expects rapid
customer growth acceleration as a result.

Citrix and XenSource officials on the morning conference call highlighted
the huge potential for the XenSource products, specifically on Windows.
XenSource has a working agreement with Microsoft that will ensure that Xen runs on top of Microsoft’s
upcoming Viridian virtualization hypervisor.

“We’re building on top of the Microsoft Viridian base,” Levine explained.
“Think of Viridian as the proxy for the Xen hypervisor. When Viriidan comes out, the same set of producs that we’ve done will be on top of Viridian. The major differentiator will be that we can offer customers a
choice, whether they want platform virtualization, a stack based on Xen or a
solution based on Viridian.”

The XenSource product lineup is expected to be integrated into Citrix’s
offering providing a complete stack of solutions that enables desktop

Though XenSource is being acquired, Levine pointed out that the open source
work will remain a separate initiative in some respects.

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