Citrix confirms XenSource acquisition

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.

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

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.

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

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.

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.

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

The Virtualization Industry Radar has been updated accordingly.