Citrix snaps up XenSource

Following VMware's recent IPO, the virtualisation market continues to heat up with Citrix's purchase of VMware's rival XenSource

Following the listing of VMware on the New York Stock Exchange on Tuesday, the market for virtualisation software has received another boost with the sale of fellow virtualisation firm XenSource to Citrix Systems.

The deal is valued at approximately $500m (£250m) in a combination of cash and stock.

In a bullish statement, Citrix said on Wednesday that it expects the combined server and desktop virtualisation market to grow to $5bn (£2.5bn) over the next four years. The company sees particular gains to be made by extending existing relationships with Microsoft: "The acquisition will also strengthen each company's strong partnership with Microsoft and commitment to the Windows platform," Citrix said in a statement.

XenSource has a range of virtualisation environments, ranging from freely available to full enterprise-class versions. On Monday, XenSource launched version 4 of its core Enterprise package, which contains a number of new features to help it compete effectively with VMware.

XenSource's co-founder and chief technology officer, Simon Crosby, said on Monday that it was now the right time for XenSource to make its mark in the enterprise market. He believes the company has been able to enjoy living in the shadow of VMware because it has striven to "do things better". 

XenSource is a small company, claiming 500 paying customers and 5,000 production users as of the end of the last quarter.

The acquisition by Citrix is expected to close in the fourth quarter of 2007.

Assuming the transaction proceeds as expected, it should add approximately $1m (£500,000) in revenue during financial year 2007, Citrix said.