There are a lot of people out there who think Citrix was a fool to spend $500m on XenSource. A few people think it was brilliant though. (Doug Brown had a good piece on the brilliance although I can't find it now.) I agree with Doug. Citrix paid $500m for a seat at the virtualization table, and they're definitely getting their money's worth. (Especially if you consider that the $500m was a cash and stock deal, and the rumor is that the cast portion was only around $120m.)
Of course there have been other major acquisitions in our industry. I've been thinking a lot recently about some of the products Microsoft bought over the last few years. In the desktop virtualization space alone, Microsoft bought:
BrianMadden.com user "AppDetective" posted a comment an RDP 7 article few days ago where he cited the "fact" that Microsoft paid $240m for Softricity, $125m for Calista, and $110 for Kidaro. If his numbers are true, that would put the total of those three companies in the $500m range too.
The problem of course we have no idea how much Microsoft really spent. I asked the community via twitter yesterday, and I got back very conflicting answers from people who "knew for sure." Some say Calista was only $28m. Others say Softricity was $400m. So really who knows?
My point is that given that we don't know what Microsoft paid for these companies, but that the Citrix / XenSource deal was cash and stock, there's a pretty good chance that Citrix and Microsoft spent somewhere in the same range for their virtualization acquisitions. (Citrix to become more broad, and Microsoft to become more focused.)
So in the context of Citrix "wasting" $500m for XenSource, look at what they got out of it for their $500m, and then look at what Microsoft "got" for about the same money for Softricity/Calista/Kidaro.