Year: 2007

The Register yesterday’s scoop has been confirmed today with expected official announcement by Citrix, which contains key informations about open source project Xen, Microsoft-XenSource relationship, XenSource other partnerships:

Citrix Systems, Inc., the global leader in application delivery infrastructure, today announced a definitive agreement to acquire XenSource, Inc. of Palo Alto, Calif., a privately held leader in enterprise-grade virtual infrastructure solutions, for approximately $500 million in a combination of cash and stock, which includes the assumption of approximately $107 million in unvested stock options. This acquisition moves Citrix into adjacent server and desktop virtualization markets, expected by Citrix to grow to nearly $5 billion over the next four years.

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The acquisition is expected to close in the fourth quarter of 2007 subject to the satisfaction of closing conditions.

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Today’s acquisition announcement comes on the heels of a substantial new release of XenEnterprise, the company’s flagship commercial product line powered by the Xen engine.

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Version 4 will further accelerate an installed base that has more than doubled in the last 90 days to over 650 customers.

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Upon close of the acquisition, the XenSource team and products will form the core of the new Virtualization & Management Division of Citrix dedicated to building and growing these important new businesses. Peter Levine, XenSource, CEO, will lead the new division, reporting directly to Mark Templeton, Citrix president and CEO. Under Peter’s leadership, Citrix is also committed to maintaining and growing its support for the Xen open source community, led by XenSource co-founder and Xen project leader, Ian Pratt. Between now and the close of the acquisition, XenSource will work with the key contributors to the Xen project to develop procedures for independent oversight of the project, ensuring that it continues to operate with full transparency, fairness and vendor neutrality – principles that are critical to the continued role of Xen as a freely available open source industry standard for virtualization.

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The acquisition will also strengthen each company’s strong partnership with Microsoft and commitment to the Windows platform. As an independent company, XenSource has built a strategic relationship with Microsoft designed to ensure broad interoperability between XenSource products and the upcoming Microsoft Windows hypervisor, code named “Viridian”. This relationship complements and broadens the successful partnership between Citrix and Microsoft in the Windows application delivery, application networking and branch office infrastructure markets.

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Assuming the transaction closes as expected, the acquisition is expected to add approximately $1 million in revenue and $3 million in cost of revenues and operating expenses to fiscal year 2007. The acquisition is expected to add approximately $50 million in revenue and $60 to $70 million in total cost of revenues and operating expenses to fiscal year 2008. The transaction will also result in approximately an $8 to $10 million non-cash expense charge for the write-off of in-process research and development in the quarter in which the acquisition closes…

Before acquisition XenSource received $41.5 million from venture capital backers Accel Partners, Ignition Partners, Kleiner Perkins Caufield & Byers, New Enterprise Associates and Sevin Rosen Funds.

Citrix stock (CTXS) didn’t perform well despite the acquisition news, starting today at $32.49, gaining 3% when announcement was made, but closing with a -1.5% (altought after hours trading are bring a +3.04% at time of writing).

virtualization.info published a preliminary analysis of how this acquisition may impact the virtualization market here.

The virtualization.info Virtualization Industry Radar has been updated accordingly.

Launched at $29, VMware stock (VMW) closed its first trading day at incredible price of $51, with a further growth of over 13% during its second day, closing at $57.71 (and reaching $58 during after hours trading).

Meanwhile its parent company EMC, which lost amost 4% yesterday, loses again today another 1.09%.

Quoting from The Register:

Citrix will announce its acquisition of XenSource tomorrow, The Register has learned.

In a bid to expand its software management play, Citrix will grab the developer of the open source Xen hypervisor. The deal will give XenSource heftier corporate backing needed to compete against VMware.

Read the whole article at source.

If confirmed this is the biggest announcement in virtualization industry so far for several reasons.

First of all hardware virtualization market is going to see three huge contenders: VMware, Microsoft and then Citrix. The acquisition is going to create even more competition between Microsoft and historical partner Citrix, despite existing deals between Redmond giant and XenSource.

Secondly it’s a critical point to understand what will happen now of Xen as open source project, since most of its developers are XenSource employees. And most of all what will happen to Virtual Iron, which is basing its platform on Xen, and to Red Hat and Novel, which are embedding Xen in their distributions.

Virtual Iron may need to fork Xen to stay on business, while Novell and Red Hat may want to drop Xen support and turn to KVM, which is already integrated in Linux kernel.

This is probably the best moment for this acquisition: today’s VMware IPO raised a new awareness around virtualization, XenSource is becoming highly competitive with new features introduced in just announced version 4.0, and Citrix alread owns other virtualization technologies: its own presentation virtualization, and application virtualization obtained with Ardence acquisition last year.

But most of all Citrix needed a new way to hold a strong market position: upcoming Windows Server 2008 will introduce enhancements to Terminal Services, making more difficult for a lot of companies additionally acquire Citrix technologies. Citrix is well aware of this and it’s extending its offering to different segments since a while. Acquiring an hypervisor like XenSource would grant the company a remarkable positioning in the most profitable IT market at the moment.

Anyway Citrix would have to face open source community reactions to acquisition, which may consider Xen project destiny too uncertain to support it anymore, and turn to KVM all together.

In any case Qumranet, the company with develops KVM, will suddenly become the most interesting virtualization startup of the moment, and its first commercial product, expected for end of September, will be expected with much more interest.

VMware announced launches of its IPO today August 14, at initial price of $29.

Company raised $957 million solding 33 million shares at this price, according to Bloomberg.

VMware also announces completion of exchange offer:

…The depositary for the exchange offer has advised VMware and EMC that, as of the expiration of the exchange offer, a total of approximately
11,005,523 shares of EMC stock underlying EMC options and approximately
4,694,163 shares of restricted EMC stock were validly tendered and not
withdrawn, representing approximately 89.45% of the outstanding shares of
EMC stock underlying EMC options and approximately 80.72% of the
outstanding shares of restricted EMC stock eligible to be tendered. EMC and
VMware have accepted and will cancel all EMC options and shares of
restricted EMC stock properly tendered in the offer…

Its parent company EMC yesterday gained over 7% in stock trading, becoming most active NYSE stock.

virtualization.info prepared a Guide to VMware strategy for IPO investors and potential buyers available here.

Update: VMware just started trading at the incredible price of $52, while EMC already lost its yesterday’s great performance, trading as low as almost -3% during the day.

Second update: VMware closes at $51, while its parent company EMC closes at $18.34, losing 3.76%.

As reported by endless news sources upcoming VMware IPO is expected as one of the biggest of last years (possibly the most interesting after Google one).

Understanding company strategy and near-term directions is critical to realize value of this investment.

For this reason virtualization.info summarized all declared and still-to-be-announced informations about virtualization market leader:

• VMware is working to extend its current market share on several areas, preparing to release VMware Server 2.0, its free server virtualization product, and possibly working with Apple to support Mac OS X in virtual machines.
• At the same time VMware is actively working to radically extends features of its virtualization platforms, introducing a new hardware appliance form factor (in partnership with Dell, IBM, HP and other OEMs), allowing 3rd parties virtual switches (in partnership with Cisco and other network vendors), and introducing support for next generation technologies (like Nested Page Tables, InfiniBand and N_Port ID Virtualization).
• But most of all VMware is extending its domain, moving away from just providing virtualization platforms (for enterprise and desktop customers).
  In particular the company will address following virtualization segments: hosted desktops (with Propero acquisition), virtual machines patching (with new Updated Manager 1.0) and securing (with Determina acquisition), disaster recovery (with an unnamed upcoming solution), and capacity planning (with integration in VirtualCenter of Converter and Capacity Planner).

  These efforts will add to existing ones in automated provisioning (with Lab Manager product) and endpoint security (with ACE product).

  On the longer term VMware may reach wider audience, porting its hypervisor to non-x86 architectures, including mobile devices.

  All exposed moves so far also lead to think VMware will continue to address all datacenter maintenance aspects (security on top), until the company will be ready to deliver an omni-comprehensive datacenter automation suite (to be built from scratch or more likely obtained through an acquisition).

• While VMware is working to innovate and extend, it has to compete on endless fronts:
  • On enterprise platform segment against Microsoft (with upcoming hypervisor codenamed Viridian), XenSource (with just released XenEnterprise 4.0), Virtual Iron and Parallels (with upcoming hypervisor Server).
  • On physical to virtual (P2V) migration segment against PlateSpin, LeoStream (both partners).
  • On hosted desktops segment against Provision Networks, Dunes (both partners).
  • On automated provisioning (aka virtual lab automation) segment against Surgient and VMLogix (both partners).

To have a better picture of virtualization market IPO investors may want to see virtualization.info industry analysis tools: the Industry Challenges report, describing which technology issues virtualization adopters are facing and which companies are working to address them, and the Industry Predictions, collecting all virtualization market forecasts released by major analysis firms since 2003.

VMware IPO price is set to $27-29 and is expected to start August 14.

The day before VMware IPO EMC gained over 7% in stock exchange (and continue to rise during after-hours trade).

As virtualization.info exposed last week, upcoming VMware Infrastructure 3.1 will expose a new VirtualCenter module called Update Manager, used to manage patches of ESX Server itself (both software version and new hardware appliance one) and operating systems hosted on it.

Update Manager will allow virtual infrastructure administrators to decide which patch to install on Microsoft Windows guest operating systems (starting from Windows 2000) and see which patches are missing from Red Hat Enterprise Linux ones.

In Windows guests case, VirtualCenter 2.1 will take care to perform a virtual machine’s snapshot before applying required patches and will even perform a rollback if something goes wrong.

VMware will be able to offer updates thanks to a yet-to-be-unveiled partnership with patch management vendor Shavlik Technologies, which already licenses its technology to other top vendors like IBM, BMC and Symantec.

Shavlik will grant VMware patch management for a wide set of applications, going well beyond simple Microsoft and Red Hat operating systems patching.

Patch management is critical for current company strategy, looking at virtual appliances as building blocks of next generation datacenters. Which implies a possible acquisition in the mid-timeframe.

Alex Payne, a developer of web 2.0 startup Twitter, just posted a very interesting set of notes coming out of a meeting with VMware developer Shawn Morel, which is actively involved in just released Fusion product, during C4, an indie developers conference helded in Chicago this weekend.

Payne’s cryptic notes expose two critical features VMware Fusion seems will get in future releases: Microsoft Windows Aero Glass support, and most of all virtualization of Mac OS.

In details Payne reports:

3D: working on drivers that will get Aero Glass going. Some Direct X games working without shaders internally. GL coming after that.

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OSx86 + VMware = virtual Mac on Mac right now. VMware would have to implement EFI and Apple’s proprietary ROM…

Read the whole post at source.

Same day XenSource announces its new XenEnterprise 4.0, VMLogix announces it will provide virtual lab automation for this platform as well, after already consolidated support for Microsoft and VMware:

VMLogix, a leading provider of virtual lab automation solutions that help software companies and IT organizations leverage virtualization to consolidate lab infrastructure and automate build and test processes, today announced a strategic partnership with XenSource, the leading provider of enterprise-class virtualization solutions based on the high-performance open source Xen virtualization platform. As part of this relationship, VMLogix announces support for XenEnterprise V4 in VMLogix’s flagship product, LabManager. The combined solution will offer a cost-effective, enterprise-class alternative for virtual lab automation…

VMLogix is also about to start a related beta program, which can be enrolled here.

On VMware IPO day, XenSource makes a strategic move and decides to announce next generation of its Xen-based platforms: XenEnterprise, XenServer and XenExpress 4.0.

This new version introduces serveral big new features like:

• 64bit platform
  Scales XenEnterprise with increasing memory density and CPU core counts, with support for up to 128GB of physical memory, and with per guest VM limits of 32GB. The new release also supports up to 8-way SMP per guest, and leverages ACPI to support dynamic hot-plugging of CPU, network and storage into running virtual machines.
• XenMotion
  Combines multiple hosts into a powerful, scalable, and dynamically manageable pool of virtual resources and leverage XenMotion to enable live migration of running virtual machines between hosts to achieve resilient, optimal resource utilization for virtual infrastructure. Automated host configuration means no per-host configuration in a resource pool, dramatically simplifying pool management. Users can simply drop virtual machines on a resource pool and the pool assigns the right resources.
• XenCenter
  Manages virtual infrastructure for the entire XenSource product family, offering the first enterprise virtualization management solution without a single point of failure. Management state is replicated across all hosts in a resource pool, enabling any host to assume the role of pool leader on demand, and dramatically enhancing resiliency and scalability of virtual infrastructure management. XenCenter is included as part of the core XenEnterprise v4 offering at no additional charge.
  
• Open Storage Repository API
  Offers the industry’s broadest range of direct attached and shared storage for virtual machines including virtual disk images using NAS, iSCSI and SAN based storage infrastructure certified by XenSource through its OEM agreement with Symantec, whose Veritas Storage Foundation product suite will be included as an integrated component of a forthcoming point release of v4.
  Delivers powerful snapshotting, cloning and thin provisioning for virtual hard disks, leveraging the integrated features of modern storage infrastructure, without requiring a proprietary cluster file system and backup technologies. Via the open Storage Repository API, customers and partners can implement additional storage repository types, integrating storage virtualization and server virtualization into a powerful virtual infrastructure.
  Supports file-backed virtual hard disks using the Microsoft VHD format, as well as block backed raw virtual disk images.
• XenAPI
  Offers the same, XML-RPC standards based management API from XenExpress to XenEnterprise. XenSource v4 offers language bindings in C, C# and Java and a powerful CLI with bindings in three popular scripting languages to empower ISV, OEM and channel partners to create a broad-range of customer-needs driven value-added solutions – protecting management investment and fostering a rich open ecosystem of value-added products

XenEnterprise v4 will be available on August 20, and includes as standard features: XenMotion, XenCenter, a 64-bit hypervisor and XenAPI. Pricing for XenEnterprise starts at $1,599 for an annual subscription license per dual socket server, and $2,499 perpetual license per dual socket server. XenSource’s midrange product, XenServer v4, includes as standard features: XenCenter, a 64-bit hypervisor and XenAPI. XenServer v4 does not include XenMotion, but the previous limits on guest VMs and memory will be removed. Additionally, XenServer will now have the ability to manage both Linux and Windows guest VMs. Pricing for XenServer starts at $495 for an annual subscription license per dual socket server, and $750 perpetual license per dual socket server. The ever-popular XenExpress continues as a freely available download from the XenSource site.

The virtualization.info Virtualization Industry Roadmap has been updated accordingly.

Brian Madden is reporting a rumor claiming Citrix is in talk for Citrix acquisition and deal amount may be as high as $500 million.

Almost at the same time Credit Suisse, which is a lead underwriter of upcoming VMware IPO, released a research analysis about why Citrix should buy an hypervisor and why XenSource is the best candidate at the moment:

We believe that Citrix may be interested in acquiring core virtualization infrastructure and management tools as part of a strategy to broaden its product portfolio to better address the next generation data center-based on our analysis of the desktop virtualization market as well as recent feedback from industry participants, combined with management’s recent public comments that virtualization and systems management are areas of potential interest for acquisition.

In our opinion, one of the Xen developers-either XenSource or Virtual Iron-could represent an attractive target for Citrix, as we believe that hypervisor and associated management solutions would be complementary to Citrix’s long-term vision of offering scalable application and desktop delivery. While these companies’ virtual infrastructure management tools are more immature versus more-established vendors, if Citrix can develop robust management software through increased R&D while leveraging the open source Xen hypervisor, Citrix could establish itself as a strong competitor in both desktop and server virtualization within two to three years. Acquiring XenSource could also strengthen Citrix’s relationship with Microsoft. Conversely, while timing and pricing for any potential transaction is unknown, the near-term implication of an acquisition of either vendor would likely be some EPS dilution…

Read the whole analysis at source.

(virtualization.info is mentioned among trusted sources for this research)

Thanks to DABCC for the news.