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Enterprise Software - Wednesday, August 15, 2007

Citrix To Pay $500M For VMWare Competitor Xensource

Just a day after VMWare's talk-of-the-town IPO. Citrix announces it iis buying VMWare's main rival Xensource for $500M. Is the timing a coincidence? We doubt it. It could help make Wall Street feel better about Citrix paying a huge premium for Xensource.

Citrix said the deal would add just $50M in revenue and $60M to $70M in total cost of revenue and operating expenses in 2008.

Xensource's open-source software lets a single computer run multiple operating systems simultaneously, so that operators don't have to buy as many servers.

Even if Citrix way over-paid for Xensource, this seems like a smart, aggressive move for the company. VMWare is dominant but Citrix can undercut them on cost and it is already selling complimentary software.

Xensource has raised $41.5M from Kleiner Perkins, Accel Partners, Ignition Partners, New Enterprise Associates and Sevin Rosen Funds.
Read - Citrix to buy virtualization company XenSource for $500 million (CNET)