Now it's Xen's turn in the virtualization spotlight (and Kenny+KT)

It's Virtual Thursday's IT Blogwatch: in which we see another virtualization acquisition. Not to mention an early Kate Bush interview by Kenny Everett...

China Martens reports:

Citrix Systems Inc. today said that it plans to acquire XenSource Inc. in a cash-and-stock deal valued at about $500 million, a deal that will thrust the application delivery software vendor into the server virtualization market. Rumors had been circulating over the past few days that Citrix would buy Palo Alto, Calif.-based XenSource, which offers both commercial and open-source versions of its virtualization products. The agreement between the two companies was announced one day after virtualization market leader VMware Inc., a subsidiary of EMC Corp., began an initial public offering of 10% of its stock.

Virtualization has become increasingly popular in recent years, particularly as a server technology ... Both companies have strong partnerships with Microsoft and intend to deepen those relationships once they become a combined entity ... XenSource ... remains committed to ensuring interoperability between its virtualization products and Microsoft's upcoming virtualization hypervisor, which is code-named Viridian. XenSource plans to build dynamic virtualization services on top of Viridian to give users an alternative to the Xen hypervisor.


Meanwhile, the Xen open-source project will continue under current leader Ian Pratt, who was one of XenSource's co-founders ... XenSource will develop procedures for independent oversight of the Xen project and bring in a third party to take over some aspects of the open-source initiative.


Over the past year or so, XenSource has been busy ramping up the enterprise capabilities of its software. On Monday, for example, the company introduced Version 4 of its XenEnterprise software in an attempt to close VMware's functionality lead. [more]

Savio Rodrigues adds:

Citrix overpaid. It happens. But this is 100% because XenSource is a virtualization vendor. If, we were talking about the CRM marketplace, I'll wager a dinner that the multiple would have been an order of magnitude less. With VMware worth over $21B, I'm sure I could sell my in-law’s dog for several thousands by renaming him Virtualization Beagle.

By the way, how many of you have heard or thought about Citrix in the past 5 years? Did anyone know they have revenues over one billion dollars? Exactly. This acquisition is as much a reason for Citrix to get back in the public/customer/investor eye as it is about a technology acquisition. Don't be surprised if Citrix gets acquired by a larger vendor down the road. Using this deal to assigning a high multiple to OSS is, if you ask me, wishful thinking. [more]

Raven Zachary agrees:

The multiple that Citrix paid for XenSource was quite high - $500m based on $3m or less in annual sales (more than 150x). Should open source vendor executives be salivating at the future prospects, based on this multiple? No.

I think that it’s clear that the multiple is tied to XenSource’s product focus, virtualization, and not to the fact that Xen is released under an open source license (nor its existing customer base). This acquisition closely follows the VMWare IPO - virtualization is hot and there aren’t many players. Citrix wanted to play, and XenSource was one of a small number of virtualization M&A targets available. When looking at the multiples for recent open source acquisitions (e.g. JBoss and Sleepycat), there is a significant gap here. [more]

Mike Magee has these words of buzz:

Citrix reckons server and desktop virtualisation markets will grow to nearly $5 billion over the next four years, so it wants a slice of that pie. The firm talks of synergies and granularities and all the usual sort of fluff firms come out with at such times. Somehow it also manages not to utter the word VMware any, um, ware in its 50,000 (approx.) word press release. [more]

Steven J. Vaughan-Nichols opines, "It's the worst thing that could happen to VMware":

It seems like only yesterday that I was saying VMware's IPO made no sense to me. Oh, wait, it was just yesterday. One of the big reasons for my dismissal of VMware's business chances was that I looked at all the open-source alternatives to VMware's flagship programs ... and I didn't see a long, happy future for VMware's proprietary offering.


[But] great technologies are made by great technologists, who far more often than not are not great business people ... Now, however, for what I think will prove to be a cheap $500 million, XenSource has been picked up by Citrix. Citrix, for those of you who don't know it, has made a living for ages by providing Windows desktops and applications to remote users with first MetaFrame and now Presentation Server.

So what, you ask? You know, I've been in the technology journalism business for over 20 years and one of the other truisms of the business is that nobody, and I mean nobody, partners with Microsoft and wins in the long run. There is, however, an exception to that rule. That exception is Citrix. [more]

Scott Lowe speaks of seredipity:

It’s odd how things work out sometimes.  I was in a meeting earlier today with our VMware channel SE and some other colleagues on our VMware team, and the subject of VMware’s relationship with Citrix came up.  The VMware SE went on to explain that there was no head-to-head competition between VMware and Citrix, and that the two companies’ products were, in many cases, complementary ... I mentioned that I had been seeing the rumors of a Citrix acquisition of XenSource, the commercial backer of the open source Xen hypervisor.  Up until now, it had been just rumors, but the buzz grew stronger over the last few days


How could Microsoft let this happen? With delays in Windows Server Virtualization (expected 180 days after the debut of Windows Server 2008 in February 2008) and that product still lacking key features such as live migration. [more]

Gordon Haff illuminates:

Citrix ... has been a niche player in the virtualization landscape, albeit a very successful one ... and is largely viewed through the lens of its Presentation Server product (what used to be called MetaFrame) that is primarily oriented towards delivering a fixed set of applications to so-called “task workers” using thin clients ... XenSource brings Citrix some legitimate expertise and product that it can bring to bear on the popular virtual-machine style of virtualization. But the XenSource name also just brings with it some legitimate street cred in the VM space. And that’s worth some serious bucks all by itself.

Microsoft blew it. In its announcement of this acquisition, Citrix makes the usual comforting noises about how good a Microsoft partner it is, etc., etc. That’s true up to a point. However, it’s also true that Microsoft is belatedly developing its own virtualization technology ... I suppose that Microsoft, in characteristic fashion, felt it had to do things its own way. That the Xen Project (although not the entire XenSource software stack) is Open Source probably didn’t help Microsoft’s comfort level any. Still, it certainly seems to me as if Microsoft missed an opportunity.

The bottom line here is that we’re going to be hearing a lot more about and from Citrix in the broadly-defined virtualization space. They were successful before, but not really mainstream. That’s going to change—especially as virtualization on the desktop begins to hit its stride as it already has on servers. [more]

Christofer Hoff gets rational:

The timing is interesting; waiting for VMware's IPO both validated the move but one has to wonder if it jacked the price any. I can't wait to see how this maps out over time across Citrix's product lines which are still fairly siloed at this point.  Leveraging XenSource's technology is a force multiplier across many elements of their offerings. It's clear what the first moves will be, but I'm really interested in the longer term play.

At any rate, this is a fantastic strategic move for Citrix; these guys are poised to continue their march to take on Cisco as they become a robust platform for application and content delivery. If you take a look at their M&A activity over the last few years, it's on a direct collision course with Cisco in many vectors. The big difference is, you can bolt their solution on instead of having to bake it in and these guys already have a footprint and expertise in the server and client consolidation markets.


It's going to get messy boys and girls. [more]

Buffer overflow:

Around the Net Around Computerworld Previously in IT Blogwatch

And finally... A blast from 1979: Kate Bush on The Kenny Everett Video Show

Richi Jennings is an independent analyst/adviser/consultant, specializing in blogging, email, and spam. A 20 year, cross-functional IT veteran, he is also an analyst at Ferris Research. You too can pretend to be Richi's friend on Facebook, or just use boring old email:

Copyright © 2007 IDG Communications, Inc.

Shop Tech Products at Amazon