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.