Virtualization cashes out

Is this the ground floor or the penthouse for the open source virtualization market?

VMWare boxes
Is this the ground floor or the penthouse for the open source virtualization market?

The two biggest virtualization software suppliers, VMWare and XenSource, cashed out yesterday in different ways.

VMWare did it by going public, XenSource by being acquired.

Citrix is the new owner of XenSource. They paid $500 million. Imagine, $500 million for a company that gives away software to enterprises.

Our Martin LaMonica reports that, because Citrix has such a close relationship with Microsoft, Big Green might just drop its pending Viridian virtualization system and go with Xen.

Citrix may have gotten a bargain, because VMWare, trading as VMW, had brokers partying like 1999 yesterday. Originally priced at $29, it opened today at $57.71. This values the company at $21.65 billion. It's also four times what Citrix is worth.

All this is taking place at a really bad moment for the stock market as a whole. It could mean several things:

  1. Open source has become a new tech bubble and we're all going to get rich.
  2. VMWare is the next Krispy Kreme. (They were near $50/share in 2002 and are now at around $6.)
  3. Virtualization is like a stream of bat piss. It's a shaft of light where all around is darkness.

Pick one.