Citrix Enters Datacenter and Desktop Virtualization Markets with Acquisition of XenSource

In case you’ve been hiding out the last couple days and hadn’t heard, Citrix has acquired XenSource for the lofty sum of $500m (which represents a truly astounding multiple, approached previously only by the likes of Skype and YouTube). This comes right on the heels of the $21b VMware IPO. In case you can’t tell, virtualization is hot. As Jonathan has noted, virtualization is actually going to be quite good for the industry, even if it seems a bit counterintuitive at the moment.

The following is directly from the press release:

Under Peter’s leadership, Citrix is also committed to maintaining and growing its support for the Xen open source community, led by XenSource co-founder and Xen project leader, Ian Pratt. Between now and the close of the acquisition, XenSource will work with the key contributors to the Xen project to develop procedures for independent oversight of the project, ensuring that it continues to operate with full transparency, fairness and vendor neutrality – principles that are critical to the continued role of Xen as a freely available open source industry standard for virtualization.

The acquisition will also strengthen each company’s strong partnership with Microsoft and commitment to the Windows platform. As an independent company, XenSource has built a strategic relationship with Microsoft designed to ensure broad interoperability between XenSource products and the upcoming Microsoft Windows hypervisor, code named “Viridian”. This relationship complements and broadens the successful partnership between Citrix and Microsoft in the Windows application delivery, application networking and branch office infrastructure markets.

It would seem to me that XenSource is going to spin Xen out as a distinct Open Source project and then align itself much more closely with Windows and Microsoft Virtualization in general (The CEO went as fas as to say “Our product focus is to provide the best Microsoft virtualization experience on the market”). With KVM and some other Linux virtualization projects making good headway recently it will be interesting to see how the various Enterprise Linux distributions respond. How that, in turn, will impact the general Xen project remains to be seen.

The other question I’ve seen raised is whether this acquisition multiple had much to do with XenSource being an “Open Source company”. Unfortunately, I’d say not really. It certainly didn’t hurt, but I’d guess the VMware IPO had more to do with it than the fact that Xen is an Open Source project. It seems clear that many smaller innovative Open Source based companies are going to be snatched up by proprietary companies as we move forward. It remains to be seen what long term impact this will have. I think it just reflects that Open Source is moving into the main stream. Some day I don’t think companies will have an “Open Source strategy” – it will just be an everyday part of business as usual. Others don’t have such a rosy outlook. Time will tell.

–jeremy