Citrix on path to become a US$5bn software giant

15 Aug 2007

Battle will be waged in the burgeoning virtualisation space between Citrix and VMWare after it emerged today that Citrix has acquired fast-growing software player XenSource for US$607m.

Citrix has entered into a definitive agreement to buy XenSource for US$500m in cash and stock plus a further US$107m in unvested stock options.

The move into server and desktop virtualisation is expected to propel Citrix to grow to a US$5bn software colossus over the next four years based on estimates from IDC and Credit Suisse.

XenSource plays the dual role of leading the open source Xen community, while simultaneously selling value-added enterprise solutions based on Xen technology. The company was founded and is currently run by the original Xen development team.

Xen software runs on a host operating system and allows several guest operating systems to be run on top of the host on the same hardware. In recent months the company struck a strategic OEM alliance with Symantec.

XenSource’s customer base has been doubling on a quarter-by-quarter basis and since January 500 enterprise customers have signed up for its technology. As well as this more than 100,000 people have downloaded the company’s Zen Express ‘bare metal’ free download.

On completion of the acquisition, the XenSource team and products will form the core of the new Virtualisation & Management Division of Citrix led by XenSource CEO Peter Levine.

“Today is a great day for the virtualisation market because customers will now have a strong alternative that is open, proven and backed by one of the most successful end-to-end software infrastructure leaders in the entire industry,” said Levine.

“This move is not about competing for the 5pc of the market that is already being served. It’s about steering into the 90pc white space that is wide open, both at the server and in new emerging opportunities at the desktop,” Levine added

Both XenSource and Citrix say the acquisition will strengthen existing ties each company has with Microsoft and its Windows platform.

“Although the market is still in the earliest phase, virtualisation already offers significant opportunities for cost savings and innovation,” said Bob Muglia, senior vice president, Microsoft Server & Tools Business.

“Citrix and XenSource have long been strong partners for Microsoft and it is exciting to see them team up to help move the market forward.”

By John Kennedy