Citrix To Offer Broad Virtualization Line With XenSource

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Earlier in the day, Citrix announced that it will acquire virtualization software developer XenSource in a cash and stock deal worth approximately $500 million. Citrix expects to complete the acquisition during the fourth quarter of 2007.

Citrix and XenSource are still working on the details on combining the two companies' channel partner programs and Citrix won't be able to act on those plans until the acquisition is completed, said Al Monserrat, Citrix vice president of worldwide channels, strategy and sales operations.

Citrix already offers application virtualization products and was expanding into desktop virtualization. The XenSource acquisition adds that company's server and desktop virtualization products to Citrix's portfolio and will allow both companies' resellers to offer "a complete virtualization solution to their customers," Monserrat said.

The executive said XenSource's channel partners, which he said numbers about 300, will be invited to join Citrix's channel partner program and its Advisor Rewards Program " a deal registration system that pays bonuses to sale influencers. Monserrat said Citrix also will likely provide training on its products for XenSource resellers.

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Expanding XenSource's distribution channels and partnerships will be critical for the company's future growth, says analyst firm Technology Business Research in a written commentary on the Citrix acquisition. "By leveraging Citrix's established distribution partners, R&D resources and account presence, TBR believes XenSource will expand at a greater rate following the acquisition," the report says.

Although competitor VMware dominates the virtualization market, TBR says XenSource has been gaining traction. To compete against VMware, XenSource, which follows a mixed open source and commercial strategy, has partnered with other IT vendors to bundle its virtualization software with complementary products. XenSource and Symantec, for example, offer a combined server virtualization and storage management solution.

The acquisition is also expected to enhance Citrix's relationship with Microsoft, with which XenSource has close ties. Microsoft and XenSource inked an agreement in July 2006 to co-develop and deliver virtualization technology that improved the interoperability between Xen-enabled systems and the virtualization technology " known as Viridian " being built into the next generation of Microsoft Windows Server.

While observers say Citrix's acquisition of XenSource makes sense for the vendor and Citrix resellers, however, there are questions about whether XenSource channel partners will benefit. "We selected XenSource because we were looking for faster and better technology," said Sergius Heifa, president of Teklan, a Toronto-based integration and security solution provider and XenSource partner. "We mix a lot of services with XenSource. Citrix is a commodity product. Its resellers beat each other up on price. If Citrix acquires XenSource, it would take an up-and-coming technology and make it just a part of its bag of technologies."

But Monserrat said the open-source development community that surrounds XenSource's virtualization engine would continue to add value to the technology.