Citrix acquires XenSource in US$500 million deal

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Citrix acquires XenSource in US$500 million deal

Citrix announced today that it has reached an agreement to acquire XenSource, a Palo Alto, Calif.-based virtual infrastructure solutions provider.

The deal is worth US$500 million in a combination of cash and stock, including the assumption of US$107 million in unvested stock options. The agreement is expected to close during this year’s fourth quarter, according to an announcement from both companies.

Citrix said it expects the acquisition to add approximately US$1 million in revenue and US$3 million in cost of revenues for 2007, and US$50 million in revenues and US$60 to US$70 million in cost of revenues for 2008.

Upon the deal’s closing, XenSource will form the foundation of Citrix’s Virtualisation and Management Division. Peter Levine, XenSource CEO, will lead the new division and report directly to Citrix President and CEO Mark Templeton.

"Incorporating XenSource’s dynamic virtualization services into our market-leading application delivery infrastructure will enable our entire product line to be more flexible, agile and dynamic, qualities that have never been more important than they are today.

"We believe application delivery will be a defining issue for IT over the next decade because applications are the language of business," Templeton said today in a news release.

"Companies that are fluent with application delivery will be the winners, while those who do not will lag behind, struggling with the pace of change in an increasingly dynamic world."

Simon Crosby, XenSource CTO, told SCMagazine.com today that XenSource has an advantage in ensuring its security because of its small code base and an open-source community.

"Customers don’t buy [virtualization] for security and they don’t not buy it for security…in the next year that will be a major consideration when customers decide what to buy," he said.

"For us, it’s really useful that we have this open-source code base, its small, it’s efficient and more people get to look at it. So, people have poked around it."

Levine said today in a statement that the deal will provide potential customers an open-source virtualisation alternative.

"Today is a great day for the virtualization market because customers will now have a strong alternative that is open, proven and backed by one of the most successful end-to-end software infrastructure leaders in the entire industry," he said.

"This move is not about competing for the five percent of the market that is already being served. It’s about steering into the 90 percent white space that is wide open, both at the server and in new emerging opportunities at the desktop."

Levine sent a letter to XenSource customers today to notify them of the acquisition.
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