Friday News round up: August 24, 2007

Here are the stories and conversations that people are thinking and talking about this week: Regarding the Citrix and XenSource Deal This piece from The Deal talks about the possibility of Microsoft outbidding Citrix and maybe going after XenSource directly.

Here are the stories and conversations that people are thinking and talking about this week:

Regarding the Citrix and XenSource Deal

  • This piece from The Deal talks about the possibility of Microsoft outbidding Citrix and maybe going after XenSource directly. (Thanks to Jeff Pitsch for pointing this out on Bink who pointed it out on The Deal.)
  • InformationWeek had an interview with Citrix's global head of marketing Wes Wasson and XenSource's CEO Peter Levine about the open source future of Xen and the integration of the two companies.
  • VMware sent a very strong letter to their partners trashing Xen and XenSource. Classy!
  • Michel Roth wrote an interesting blog entry where he suggests that Citrix picked up XenSource mainly for the value they will someday add to Viridian, rather than for the value they add to the Xen hypervisor today.
  • There have been hundreds of stories (Google News Search) and thousands of blog entries (Google Blog Search) about the acquisition. The general feeling seems to be positive, although some open source people are very not happy.
  • Where does this deal leave someone like Virtual Iron? Should they be looking for a nine-figure buyout now?

After a week of thinking and talking to more people, Brian now believes that Microsoft had a bigger part in this deal than we originally thought. Citrix has recently stated (before the XenSource acquisition) that VMware was their biggest competitor. And Microsoft is saying that VMware is a big competitor. (To be honest, we're not sure why either company thinks this.) But if Microsoft and Citrix have a common enemy, does that make them automatic friends?

SInce Viridian is now delayed until at least six months after the Windows Server 2008 launch, and since it had many of its really cool features removed, my guess is that Microsoft needs someone like Citrix to offer value on top of their hypervisor in order to go up against VMware, and it seems that the XenSouce stuff that Citrix just bought could be just the ticket needed to do that.

Just imagine? Microsoft could call Citrix on the down-low, get them to buy XenSource. That gives Citrix some revenue in the virtualization space. Maybe Microsoft makes other source code guarantees. Microsoft can have (what's approaching) a viable competior to VMware in their pocket. It's possible?

In Other News

  • NetworkWorld named the "10 virtualization companies to watch." Among them is Provision Netowrks. Provision has done a great job transforming themselves from "just another Terminal Server add-on" product to a leader in the virtualization space with their Virtual Access Suite. (The Virtual Access Suite is years ahead of what Citrix is doing in many ways, especially in the area of integrating VDI and SBC application delivery into a single platform.)

App Delivery Companies in the Stock Market

  • Citrix (CTXS) closed at $34.99 last night, up from $32.27 a week ago
  • Microsoft (MSFT) closed at $28.30 last night, up from $28.10 a week ago
  • VMware (VMW) closed at $70.20 last night, up from $57.33 a week ago

VMware's market cap is now $26B, compared to $6B for Citrix. In other words, the market views VMware as 4x more valuable than Citrix. Of course for a quick dose of perspective, Microsoft's market cap is $265 billion, or roughly 10x VMware and 44x Citrix's.

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I have a hard time swallowing the "hidden hand of Microsoft" theory.  Way too much risk to Microsoft if exposed.  This had to be Citrix's idea.  They may have asked Microsoft about it to make sure it didn't piss them off, but I don't really see Citrix as being that open to risk asking before buying.  But it is always fun to speculate!


I agree with Tim, if this were true there's only a down side to Microsoft being caught

Given VMware's price it strikes me that either VMware is over-inflated or EMC is cheap - I know which one I'd choose?

it is absolutely ridiculous to think msft would bid $1b for xensource.  that analyst hasn't got a clue.  msft needs ctxs to succeed with xensource b/c viridian clearly will come to market late and lacking many of the technologies that vmw has today.  in the end...msft could just snatch up ctxs.

Hmmm....apparently we've all forgotten about Microsoft's IP licensing deal with SCO and their matchmaker job with Baystar which subsequently lead to additional lawsuits from SCO against Novell and IBM.  Hidden hand....nah!




I do agree with you Tim, This idea is probably Citrix only, as Microsoft has goten their hands burned a bit on similar stuff before.

But I am still hung up in the Viridian bit, I firmly believe that the major part of the money Citrix are shuffeling out for this deal, is payment for access to the Viridian code through the access that XenSource had.

Yesterday I had a long talk with one of the Citrites here in Norway. He is very confident that this new constellation will prove a real and strong competitor. And that VMWare shows signs of fear in their reactions. But he also had to admit that they are major underdogs, as the race for hypervisor market shares are getting exciting ...

Yeah, that pretty crazy.  I mean, you think $500M is a lot for some management tools (and NOT EVEN a hypervisor), $1B is ridiculous.  You can bet VI is happy as hell right now, though.  It's like your neighbor, who has the exact same house as you, just sold it for 10x what he paid for it 5 years ago.  I mean 100x...wait...500x :)

If you look at Citrix acquisitions and milestones recently (XenSource, Desktone, Ardence, Reflectent, Citrix Desktop Server), this acquisition is consistent with the desire on the part of Citrix to provide end-to-end application delivery infrastructure, now matter how businesses want to deploy it (SBC, xDI, app/OS streaming - virtualized or not and any mix thereof)

Citrix will be able to provide businesses with the flexibility to deliver applications to users on demand as a service, no matter where, when, and how those users are connecting.

Clients will be able to choose between SBC via CPS, provisioning traditional or virtual PCs using Desktop Server, streaming both applications and OSes on demand using technology acquired from Ardence and Desktone and doing any mix of virtual or traditional hardware that customers demand. If Citrix can provide a virtual infrastructure on par with what VMWare offers, then they are no longer at the mercy of VMWare technology and can more tightly integrate their product line into a virtual infrastructure.

I think this move was a necessity for Citrix as VMWare momentum has been huge as evident by the recent IPO. Citrix needs to be seen as a viable option to VMWare, matchich VMWare offerings at every level. If Citrix can pull this off successfully, they will own the SBC market, much of the VDI market, and more importantly, the emerging SaaS market as well.

In the near future, completely hosted virtual infrastructures will become a viable option for many business and there will be a lot of money to be had by software vendors that cater to big data centers.

As IT technicians, we all better get ready for a bumpy ride as this consolidation to the data center and hosted "software as a service" solutions are going to displace a lot of technology workers who don't keep up.

Alan Osborne
VCIT Consulting
p: 604-288-7325
c: 778-836-8025