A brief history of Xen and XenSource

As you are by now aware, Citrix announced its intention to acquire Xen-based virtualization provider, XenSource, for $500MM. I wanted to take this opportunity to address VMware’s valued partner community and provide our position on this acquisition.

First, I want to thank-you for your continued investment in VMware. We all have a tremendous market opportunity in front of us with a huge potential for VMware partners and I look forward to working with you to achieve it. Together we have already achieved great success, with 20,000 customers adopting VMware virtualization solutions, but we are all just getting started!

Regarding the new Citrix/XenSource combination, while we will always encourage you to sell the solutions that best meet customer requirements, we are also confident that VMware solutions are a superior offering. This acquisition should have no impact on VMware’s market position. As VMware has the expertise and the technology to enable unparalleled customer success today, customers will continue to demand VMware solutions.

One thing I do want to make clear is that VMware will continue to fully support those customers that have chosen to deploy both VMware and Citrix solutions. While we acknowledge that VMware and Citrix will now compete for some new accounts, current joint VMware/Citrix customers will see no change in VMware support.

VMware’s commitment to you, our partners, is that we will continue to build superior virtualization solutions, we will continue to innovate, and we will continue to work with our channel partners to enable the success of all our shared customers. All of you, our world-class partners, are very important to us, and we at VMware will commit to doing everything possible to ensure that your investment in us and our shared future will be greatly rewarded.

The following points articulate why VMware is the best virtual infrastructure partner and solution provider.

XenSource failed to gain measurable market share. Its upcoming XenEnterprise v4 release still has major shortcomings compared to VMware Infrastructure 3.

Citrix provides impressive technology, but its competencies and resources are not in the field of system-level virtualization, which is what XenSource needs in order to deliver an enterprise virtualization solution. VMware has an unmatched infrastructure in place to develop, certify and test virtualization solutions. We continue to invest massively to extend our R&D and support.

In spite of recent acquisitions, Citrix revenues and energies are still heavily focused on Presentation Server. Citrix corporate and field organizations will need time to develop the expertise required to support partners and customers with unfamiliar virtualization products.

XenSource still cannot deliver the capabilities of 3rd-generation VMware virtual infrastructure. Citrix technology will

Virtual Iron has had LiveMotion and other VMware-like features for much longer that XenSource.  Compared to Virtual Iron's features, XenSource's are pretty untested and immature.  Virtual Iron is also credited with a lot of the improvements made to the Xen hypervisor; they are one of the most active contributors to the Xen project.

XenSource has less than $1M in revenues.  The $5M that's been floating around is really $1M + $4M.  The $4M was a one-time fee collected from Microsoft for the Xen/Viridian interoperability project.

VMware of course has started bashing XenSource...it was good to see the Virtual Iron comments.

I think whoever can get it right for the SMB business bracket will win out...all the companies *except* VMware provide decent management software for free or a nominal cost -- VMware charges $5000 for Virtual Center, plus you have to buy Windows and SQL licenses.

ESX remains the best in terms of market share and overall support, their forums are fantastic, but VMware at this point really caters more to big business that can easily afford 6 grand for a management server...IMHO.

 Thank you, Tom

I thought it meant job title!! LOL

Could the moderator please change it to 'VMware costs are not good for SMB market'?? 

Thank you, Tom 

Have read this:  http://www.crn.com/software/201400070?pgno=1

VI is a solid product, but very complicated to get up and running.  In short they all do the same thing, it is just who does it better.  "

Compared to Virtual Iron's features, XenSource's are pretty untested and immature."

Do you have facts? 

Yes, I do have facts.  As of last March, they had absolutely nothing to speak of, while VI has been supporting these advanced management features for over a year.  Meanwhile, VMware has been watching VI like a hawk, silently acknowledging them to be the only viable direct threat.

Do you have facts to the contrary?

Gabe,

First of all excellent job bringing everyone up to speed.

I want to make a couple of comments on the deal price, forecast and the transaction in general: first, I believe there was a bidding war for XenSource; second, I am highly suspect of forecasts calling for $50MM for next year; and finally, a transaction like this one can be very risky because it can either make or break a company.

The reason I believe there must have been a bidding war is, realistically, who could have turned down $250MM or $350MM if there was no other bidder? The announcement indicated there were $109MM in outstanding options. $250MM more than doubles that -- If you are Peter Levine it would be hard to go back to Ian and Simon (one of the other founders) and say that you turned them down (especially if you knew Citrix's reputation to only make one offer). It seems to me the only way to negotiate like that is to have someone else waiting in the wings.
Regarding the estimated $50mm in revenue for '08 -- I have never seen any company no matter how good their product is or how hot the market is increase their revenues 50x year over year. The reason is that the infrastructure to complete the transactions is not in place. A relevant recent example of this is the Reflectent acquisition. EdgeSight's competitors were able to pick off quite a few deals in the six month period following the acquisition because Citrix resellers weren't trained or authorized to resell EdgeSight. Also, it took longer than expected for all of the Citrix SEs to cycle through EdgeSight training. Without the resellers or SEs available, deals that could have gone EdgeSight's way went to other companies. If history repeats itself than Citrix won't have the staff in place to do $50MM worth unless they steal resources from other products and that brings me to my last point: XenSource could be every bit as successful an acquistion for Citrix as they hope and this could still backfire. Paying out 1/2 billion dollars will leave some rank & file Citrites hurt and others jealous. You just have to figure that there is some internal strife from a percentage of the long-time-hard-working Citrites not getting their share. You have to believe that management will be laser focused on seeing this succeed and that means that other projects may go wanting or get eliminated. But, to get from a $1B company to $5B company takes risks and you have to give Templeton credit for trying (Sequoia not withstanding).

Kevin

Anyone considered the fact that Citrix bought Xensource by mistake and is now looking through articles and forums to find the best use for their newly purchased company? :-)

In all honesty i think the guest comment is the best suggestion i have heard so far, and i think we have all heard alot. But it would make sense as Microsoft ventures into uncharted territory that they would want one of they strong alliance partners with them. And to spice it up, i am pretty sure that Microsoft would have had their hands full legal-wise if they had tried to purchase Xensource(like another BM.Com reader commented). So this works out for all of us i think.. We need virtualization of OS, Apps, Phones, Pizzas and whatnot to spice up our Centralization and consolidation Toolbox.. and now we might get solutions from the vendors we already do business with... Provided ofcourse that Microsoft finishes up Viridian and delivers a decent product :-)

 /LamerSmurf

I think it's interesting that they picked XenSource when SWSoft or VI would have been a better choice.   For $500+ million dollars they could have had access to a hypervisor AND OS Virtualization (Virtuozzo).

From a "Let's spend money" page,  how about we petition Citrix to dump some money into building up Presentation Server.  Sure 4.5 came out recently that made a few improvements over 4.0, but lets be honest, it's nothing more than a feature pack at best.  How about adding some real functionality like "Session Virtualization", the ability to Migrate Session to another servers.  Application Templates,  Server templates, ability to filter applications via policy, ability to take a server offline and still be able to adminster it via  RDP AND ICA, ability to publish apps via policies,  EVEN the ability to add a NEW server to a group of published applications (with out having to open each app, use a script, or use a 3rd party product),  and may finish the CMC to AMC conversion.

Joe

Sounds like a lot to ask from a 7 year old architecture.

Washington had to cross the Delaware, Citrix will get past it too. <para-phrase>

Seems to me that Citrix may be looking at purchasing Virtual Iron to complete the set. After all, it's built on the same Xen platform. I'm sure they've got an extra one or two hundred million to make another purchase.

"I think it's interesting that they picked XenSource when SWSoft or VI would have been a better choice.   For $500+ million dollars they could have had access to a hypervisor AND OS Virtualization (Virtuozzo)."

It's not just about buying software/technology Joe, XenSource is UK/US based while SWSoft is Russian.

That is very true.  Even Cisco has been know to aquire companies because they are in the general area of their corporate offices.

 Joe

But at the same time,  $500 million dollars is a lot of money to pay for location and a handfull of employees.  I'm sure it will all work out.

Joe 

Maybe they wanted into this field and this is the only one who would sell.

Don't put to much credit into Citrix, there a big 'C' now. 

VI would have been a better buy but either they were not selling or asked for a lot of $$$s.