VMware Suffering From Xen-ophobia
by John Paczkowski
Posted on August 15, 2007 at 1:01 PM PT
Well, VMware’s definitely going to get a run for its money now. Not 24 hours after the virtualization leader’s spectacular public offering, Citrix Systems said it would purchase open-source server virtualization outfit XenSource for $500 million in cash and stock.
Five hundred million dollars. Quite a sum–especially when XenSource is burning through $15 million a year in expenses, but generating just “a few million in revenues,” according to Citrix CFO David Henshall.
That said, Citrix expects the server- and desktop-virtualization market to balloon to $5 billion by 2011, and this acquisition will put it in a good position to carve itself a piece. Said Peter Levine, CEO of XenSource: “This move is not about competing for the 5% of the market that is already being served. It’s about steering into the 90% white space that is wide open, both at the server and in new emerging opportunities at the desktop.”
Course, that space won’t be wide open for long. Microsoft is belatedly developing its own virtualization product called Viridian. And when it finally debuts the virtualization land grab will really begin. As the research outfit 451 Group told its clients: “The virtualization market now revolves around three players: market darling VMware; Citrix’s combination of young blood and old money; and the (potential) threat of Microsoft’s Viridian, slated to ship in Q3 2008. Both Citrix and VMware have a 12-month window of opportunity before Microsoft shows its full hand.”
