Citrix Systems Inc.'s $500 million cash-and-stock purchase Wednesday of XenSource Inc. could spur software giant Microsoft Corp. to put Citrix, a provider of application delivery infrastructure software, on its own acquisition target list. At least that's the take of the 451 Group, which speculates that Fort Lauderdale, Fla.-based Citrix is now an acquisition target after bolstering its technology with the addition of XenSource's enterprise-grade infrastructure software. Microsoft has a long history with Citrix going back more than a decade. Last summer, the software giant extended its marketing partnership with Citrix and initiated one with XenSource. Other potential buyers of the new Citrix include Hewlett-Packard Co. and Cisco Systems Inc.

The Citrix announcement comes one day after virtualization software provider VMware Inc. skyrocketed out of the gate with a $1.1 billion IPO and was valued at an incredible $19 billion. Citrix had been struggling to improve its virtualization offerings but may have been hurt when Microsoft acquired Citrix rival Softricity Inc. in May 2006.

Competition among virtualization players has definitely intensified, and the battle isn't won yet. VMware is still the market king, but Microsoft's Viridian product, slated to ship in the third quarter of 2008, and Citrix, with its new XenSource offerings, are now viable threats. XenSource has a "crucial and growing relationship" with security giant Symantec Corp., 451 Group points out, and both XenSource and Citrix are likely "hoping VMware's IPO proves to be a distraction." —Cheryl Meyer

See Aug. 15 press release from Citrix.com
See Aug. 15 story on XenSource buy from TheDeal.com
See Aug. 15 post on ZDNet
See Aug. 15 story on VMware IPO from TheDeal.com
See July 17, 2006, press release from Microsoft.com

Tags: software, acquisition, m&a, mergers, vc, venture+capital