IBM, Cisco Eye Citrix Buy?

Michele Masterson

April 08, 2008, 03:11 PM EDT

"We hear there are takeover rumors going around on Citrix today, with IBM or Cisco being talked about as the buyers," said Jeff Gaggin, enterprise software analyst at Avian Securities. "We don't know if there is truth behind the rumors, but it does make sense."

Gaggin said his comments were made in response to clients who questioned why Citrix's stock rose $2.10, or 6.8 percent, to $32.94 in midday trading.

"The stock is up $2 dollars, that's pretty rare, there's a lot of chattering in the market."

An IBM representative said the company would not comment on rumors or speculation. Citrix did not respond to inquiries.

Gaggin said that if either one of the tech giants are looking for a virtualization play then Citrix would be a good acquisition candidate, given that their "management capabilities" are relative to virtualization leader VMware.

"We think that Citrix has become a real threat to VMware, especially after they bought XenSource, because Citrix has strong virtualization management features like live migration," said Gaggin.

Microsoft, Gaggin said, is unlikely to woo Citrix, as it is tied up in trying to acquire Yahoo. He also said that Microsoft is 'well on their way to building a presence in virtualization with the upcoming launch of Hyper-V, even though it won't have the virtualization management capabilities that VMware does. We also think Microsoft prefers Cisco as a partner."

It should be noted that Gaggin is a software analyst, but does not cover Citrix.

Another financial analyst, who does cover Citrix, said that IBM is the more likely buyer of Citrix than Cisco, but cautioned that there have been takeover rumors around virtualization providers given that there is 'a lot of consolidation going on in the market.'

"Citrix is a well-run company but I don't have any reason to believe this," said the analyst who requested anonymity.

The analyst also said that between the two possible suitors, Citrix would be a better fit for Big Blue, given that they have "more connectivity" with Citrix's core business.