Will Microsoft buy Citrix?

Last week, several industry sources published articles titled "Will Microsoft buy Citrix?" The authors of these articles wrote "According to Microsoft insiders, Forbes speculates that Microsoft might eventually buy Citrix.

Last week, several industry sources published articles titled “Will Microsoft buy Citrix?” The authors of these articles wrote “According to Microsoft insiders, Forbes speculates that Microsoft might eventually buy Citrix.”After reading the source article on Forbes.com, it turns out that Forbes didn’t really speculate this at all, nor did a Microsoft “insider” actually make that comment. So really the articles saying that “Forbes” said this are not based on fact and are just trying to get people excited over nothing.

Nothing against the analyst Forbes.com quoted, Roger Kay. Roger was talking to Forbes about Microsoft competing against VMware. He just happened to make an offhand unquoted comment about Microsoft needing to act fast to compete against VMware, and that maybe they wouldn’t be able to do it on their own and would have to buy someone like Citrix. This somehow blew up into him being the “insider” and “Forbes” being the one who speculated.

That said, let’s continue down this path and think about whether Microsoft would ever buy Citrix. This is probably the #1 most-asked question of me when I give speeches. My “standard” answer over the years has been something like this:

Citrix makes most of their revenue from Presentation Server, but every copy of Presentation Server requires a Microsoft TS CAL. Citrix has 4000 employees. If most of those employees are directly or indirectly pushing Presentation Server, this is like Microsoft getting an additional 4000 people working for them without actually having to hire them as employees. So really, the question is “Why would Microsoft even consider buying Citrix since they're getting all their help for free?"

Of course that answer was more relevant in the pre-XenSource days. Now that Citrix is focused on hardware virtualization too, and now that Microsoft and Citrix are combining to fight VMware, that reason doesn't make as much sense.

Another reason that doesn't make as much sense anymore is the reason Microsoft employees cite if you ask them why they haven't bought Citrix yet. For years Microsoft employees have claimed that the US Department of Justice would not allow it because it would be anti-competitive. This might have been the case in the days of Presentation Server, but back then Citrix was already a border-line monopoly. Now that Microsoft and Citrix are trying to compete against VMware, the government regulation argument doesn’t really hold up either.

So really, the two main reasons used to justify why Micorosft should not buy Citrix in the past don't really apply anymore. Of course that is very different than saying that Microsoft should buy Citrix today.

But what if they did? What if Microsoft did buy Citrix? Think about Citrix’s main products:

  • Citrix Presentation Server: including application streaming, TS enhancements, ICA, SmartAccess, and lots of other cool SBC technology.
  • Citrix XenDesktop
  • XenSource with all of the virtualization management tools and capabilities.
  • Citrix Provisioning Server (Ardence), which you know I love and can add cool capabilities to VDI, virtual, and even tradition “large farm” (IIS, Citrix, etc.) servers
  • Citrix Online, GoToMyPC, GoToAssist, GoToWebinar, etc.
  • The Application Networking Group, which includes the NetScaler appliances and the SSL-VPN stuff.
  • EdgeSight for application performance monitoring.
  • The Application Gateway which ties Citrix software into corporate telephone systems.
  • WANScaler and the other WAN optimization hardware and software

This is just a rough list of the major areas and products that Citrix offers now. If Microsoft bought them, how could they integrate what Citrix offers into what Microsoft offers? Let’s look at that same list:

  • Citrix Presentation Server. Of course this could finally make Microsoft the only vendor needed for delivering SBC access to applications. They could also take the application streaming capabilities of Presentation Server and combine them with the core functionality of SoftGrid to create a single, unified, completely awesome product.
  • Citrix XenDesktop. Microsoft could finally have a true end-to-end VDI offering. Maybe they could even include a license for this in the VECD license?
  • XenSource. If Microsoft owned this, they could actually offer an end-to-end solution instead of doing that crazy dance with Citrix where Microsoft makes the hypervisor, Citrix adds capabilities, and then Microsoft manages the capabilities.
  • Citrix Provisioning Server. This technology is just plain awesome and would certainly be an asset to Microsoft. Microsoft could really tie this into System Center for a truly dynamic solution.
  • Citrix Online. All of this stuff would fit nicely into Microsoft’s suite of “Live” services.
  • The Application Networking Group. This doesn’t quite jive with the rest of what Microsoft is doing since so far Microsoft has not entered the physical appliance space in the enterprise market. Plus these things all run versions of Linux and BSD. Maybe Microsoft could re-write all this stuff to run on Windows? (Har har!) Or maybe they could just sell them off?
  • EdgeSight. This would also slot nicely into System Center. This type of functionality doesn’t exist from Microsoft today.
  • Application Gateway. This would fit nicely in the Office Live Communications and Exchange product groups.
  • WANScaler. I guess this would have the same problem as the NetScaler stuff, although Citrix does have a software client for this. Maybe Microsoft could build this into ISA Server?

You know what? This is going to sound crazy, but after reading that whole list… Man, maybe Microsoft should buy Citrix? It certainly seems like there would be a lot of cool alignments. The two companies don’t really have any competing products, and except for the NetScaler hardware, pretty much everything Citrix makes could add cool functionality into existing Microsoft products or businesses.

How much would this cost? I don’t really understand how companies determine what price to pay for other public companies. Citrix has $1.6B per year in sales with a stock market capitalization of $6.4B. However, Citrix is currently buying back shares of their own stock which is a sign that they feel their stock is undervalued, so they might view their potential market cap of $8 or $9B. Even though I have no idea what the exact price would be, it’s safe to say that in order for Microsoft to buy Citrix, they’d have to spend several billion dollars.

So the question is not “How cool would if be if…” or “Look how well the products would integrate.” The question is “How fast (if ever) would Microsoft recover their several billion-dollar investment if they were to buy Citrix?"In other words, after subtracting out the purchase price, will Microsoft make more money by owning Citrix than they would if Citrix stayed independent? Or, are Microsoft and Citrix so closely aligned now that Microsoft can receive all the value they need from Citrix without having to part with a huge pile of cash? That's been the #3 main reason why Microsoft would not buy Citrix, and there's a good chance that one still applies today.

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My personal opinion is it would be highly unlikely.  The major issue be keeping XenSource (or any open source project) at arms length...but compatible with it's core technology (i.e Novell).  Both Novell and Citrix are also the poster boys on how to succesfully partner with and compete against Microsoft at the same time...something needed in a heightened regulatory enviroment.

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Ok, so Microsoft isn't the smartest of the bunch.  Geez, one look a Vista should tell you that much.  But, hey, they could grow a brain and aquire Citrix.  Who knows?
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http://www.onegreatpartner.com/


Looks like it is just a matter of time.....

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Hi Brian


M$ bought Whale SSL VPN last year, So I guess they are already in the hardware appliance space !


I dread to think what the M$ / Citrix licensing model and product names would then look like for these combined offerings ;)


Souter

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I think Whale is software only though. It snaps-in to ISA. But yeah, licensing for the lot of this.. oh man!
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IAG 2007 is actually a separate product that can run without ISA.  Here is an intro to it:


http://www.gilham.org/blog/lists/posts/post.aspx?id=156


Also, I noticed that in Vista SP1, the SSL VPN client components are being added natively.

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XenCitrixSoft, a loosely coupled division of Microsoft :-)
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Whether MS buy Citrix or not, it looks like the two companies combined have the product set to blow VMware out of the water.
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Until you realize how many features VMWare has vs Microsoft's Hypervisor that people do actually use.  Then you realize that MS's Hypervisor really truly is a glorified version of their current virtualization product.
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and finally put Citrix's marketing team to rest.
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I don't understand what you mean by your comments?
Please elaborate...

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Question: Will MS sell more licenses when they buy Citrix? If not, why run the risk of becoming a monopolist on yet another area? The MS TS Department has a pretty large (external) marketing team which operates pretty much for free :)

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I like Microxentrix.
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Microsoft's new Hypervisor shipping in 2008 has 100% of the funtionality that 99% of customers need.  There will always be a niche for VMWare, but not the market share it enjoys today because it's the only one doing the marketing.


Today's shipping MS Virttual Server 2005 product meets the actual business needs of most customers (including clustering with 10 second failover).  While you pay a 25% performance penalty when compared to ESX today,  you can by more powerful server (or a tablet pc) with the money saved on VMWare support contracts.


XenSource will also provide a stable foundation of hosting linux based servers...they both use the same VHD format so you can easily move them back and forth too.   When managed by Microsoft Virtual Server Manager 2007 you get unified adminstration, centralized management, and automated p2v migration.


 


 

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Oops, you have to capitalize the ?id=156 to ?ID=156 for the url to work above.


 

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Of course!  Desktop Virtualization is just beginning and Provisioning server is awesome.  See, PS isn't the only technology that Citrix sells.
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if Xen and Hyper-V can coexist why cant Xen and VMware ESX? :-) and it would give EMC/VMware access to a great channel into the growing Server Based Virtualization Computing Community :)


/LamerSmurf

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We've got about 80 years on this planet, if we're lucky. Is worrying about some computer system really all you can come up with?
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Let's think about market cap, business model, revenue stream, complementary products, and overlapping technologies for just one moment. Now think about who can afford this company as it continues to grow.


Yes, MS is certainly one; But why?. Are there others? HP - Yes, but why? If Citrix soon become a $2 billion / year (or more) company, someone would need to spend 8 to 10 time that amount to acquire them! Can Xentrix become even a larger global player?


I am interested in hearing readers' opinion.

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Can anyone tell me why MS think they will create longterm profits by buying Yahoo?  Really, for Web Apps MS lags far behind Google and the many other inovative smaller companies online (FaceBook, Amazon, rememberthemilk.com, etc) - anyone try Windows Live Spaces recently?  Windows Messenger is perhaps an exception - but it is Windows software, not a web app.

This is because MS are a big systems company, still tied to the 'big project' model of software development, not suited to the user-centric ad-funded 'beta' web market (MSN is surely only popular because it's the default home page and Messenger?). 

With Citrix they could provide all the wonderful features mentioned in this article and keep the stable, BIG, revenue they rely on from enterprise customers rather than losing market to VMWare (& others).  Rather than trying to play catch-up with Google on ad-revenue models (which Google is too far ahead) they should focus on what earns them cash (Windows Consumer + Enterprise + MS Office) and wait until the web market changes.  It is an economic downturn after all - they should save $30b and buy Citrix!

 

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Yahoo in. Citrix out.


Because the biggest threat to MS is Google - not VMware


 


 

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It's merely a question of whether they would rather devour submissive prey than have a noisy meal, but in any case this will all be drowned out by the battle going on next door with Google (where the hunter becomes the hunted)!

Virtualisation is commoditised, 'real' terminal services are here with Windows Server 2008 (already available to us MSDN subscribers) and nobody in the know cares about perimeter security any more - the writing's on the wall people and unless Mark manages to pull yet another big juicy white rabbit out of his hat (like some kind of AWS style SaaS play for MS infrastructure & desktops) then the next news we'll hear about is some long overdue belt-tightening at Citrix.

Kudos for keeping the game alive for this long though!


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