Whenever a big technology vendor acquires another, rumors about success or failure are sure to follow. Generally there is a bit of a grace period, but six to nine months down the line, the grapevine gets active with tales of woe, and Wall Street really pays attention.
Symantec still gets questioned about Veritas, while EMC can't shake scrutiny about RSA. Now Citrix has joined this club as many industry and investment pundits are questioning whether Citrix got its money's worth when it bought XenSource last August. The doubting Thomases say that Citrix is failing in the virtualization server market and is slowly fading away and seeding this space to VMware and Microsoft.
When ESG's virtualization guru Mark Bowker heard these whispers, he asked Citrix for a few post acquisition server virtualization metrics to judge for himself. Based upon this information, it appears Citrix continues to invest in and benefit from its acquisition of XenSource and its server virtualization product, XenServer. For example, Citrix says that XenServer sales continue to double each quarter and that all the major x86 server vendors are actively bundling and shipping the product. Citrix has also increased the number of trained XenServer resellers from 300 to more than 2,500 in that timeframe. Finally, Citrix is making internal investments in sales and marketing staff and actually delivered a new version of XenServer this March. Sounds like progress to me.
In 1987, I entered the tech industry workforce and competed head-to-head with IBM for sales. At that time, IBM was masterful at a sales tactic called FUD (i.e. fear, uncertainty, and doubt), using innuendo and rumor as a way of dissing the competition. Times have changed, but FUD remains a key competitive sales tactic. In the Internet age however, sales-based FUD quickly turns into industry and Wall Street rumor.
The naysayers never die and Citrix is now caught in the vortex. The only way out is communications, continuing progress, and more success metrics like these.
Everyone in the industry remains ga-ga over server virtualization and with good reasons. According to ESG Research, over half of organizations large and small have already implemented server virtualization and of these users, 46 percent claim that they are running Tier 1 business applications on virtual hosts. The numbers don't lie. Virtualization has moved well beyond industry hyperbole.
Yup, server virtualization is great but it doesn't live in isolation. For server virtualization to work well, it needs to blend with networks, applications, and management tools to create a virtualization architecture. This isn't easy and few vendors understand all of these layers well enough to make things work. As so often happens, CIOs are left to piece together their own solutions. Surely there must be a better way.
Enter Citrix, the company best known for its Presentation Server product. Citrix acquired XenSource last year and promised to deliver virtualization from desktop to data center. This week, Citrix took a giant step in this direction with the introduction of a new virtualization architecture called Citrix Delivery Center.
The beauty of Delivery Center is that it is a one-stop shop combining desktop, server, network, and application virtualization together. Heck, Citrix even includes a whole bunch of other tools for access, identity, and performance management and also introduced a central virtualization management system named Workflow Studio to orchestrate the whole enchilada.
Citrix has plenty of work ahead of it and Delivery Center is no guarantee of success. Nevertheless, the fact that Citrix is approaching virtualization from an architecture basis shows a lot of intelligence and moxie. In effect, Citrix is becoming a virtualization one-stop shop. Large companies seeking the benefits of virtualization while avoiding system integration headaches will certainly appreciate the value in inherent in this model.
I just heard from an unimpeachable source close to the company that Zimbra's revenue last year was ~$6 million. (Though the more interesting number is the significant increase they've had this year (on track to hit $20 million), which points to a strong future.) That makes the $350 million acquisition by Yahoo outstandingly profitable for Satish and crew. That's a ~60X valuation (on 12 months trailing revenues).
Was Yahoo foolish? Yahoo isn't a foolish company. I think it means that Yahoo believes Yahoo plus Zimbra is worth more than $350 million, and I think it's right. Citrix spent $500 million on a company that had $1 million in 12 months trailing revenues. Foolish? Not when you consider the future.
... Read moreThe unfortunate thing about writing all your thoughts down in a blog is that it makes it very clear just how wrong I can be sometimes. My "code" is online, for everyone to see, analyze, and critique.
And critique you do. :-)
A case in point is my fulminations earlier Thursday on XenSource and its alleged abandonment of the Xen project. John Vigeant, a friend from my Novell days and XenSource's director of Business Development, kindly swatted me in an e-mail for errors in my post.
Witness my sackcloth and ashes (with John's permission--he must have some perverse pleasure in seeing me don this hairshirt :-):
... Read more
(Credit:
Zim Rent-a-car)
I read this Charlie Babcock (InformationWeek) interview with Peter Levine (CEO, XenSource) and Wes Wasson (corporate VP of worldwide marketing, Citrix), and I'm left with the feeling that XenSource really doesn't see Xen's future in open source, but rather in Windows.
Which makes me think it may be time to fork the project and move on. But then, the company already did that for us, didn't it?
... Read more
Saying open source is incidental to Citrix's acquisition of XenSource is like saying one would buy Red Hat and not care much about its role in the Linux kernel. Yet Matthew Aslett and Raven Zachary both suggest precisely this.
I guess they're following the flawed reasoning that Savio Rodrigues uses. Namely, that if Citrix cared about Xen and not just XenSource's proprietary technology, it could just fork Xen for free. This would be true if it weren't false. Xen without open source is an emperor without clothes.
It's also the reason that Novell failed to entice XenSource into an acquisition when it was knocking on Peter Levine's door nine months ago. It tried the "fork" argument, and gave a low valuation as a result. Guess who acquired XenSource?
... Read moreWow. The ink was barely dry on my critique of Tim O'Reilly's position on whether proprietary companies will buy up the open-source companies, and along comes the news that Citrix is buying XenSource. It's a good technology fit, but Citrix would have been one of the last companies I would have accused of a predilection for open source.
Mea ignoranta.
The news is pretty intriguing, and funny on at least one count:
... Read moreIt may be virtualization, but we're talking real bucks.
Virtualization services are expected to turn into an $11.7 billion market by 2011, more than double its current level, according to a study released Wednesday by IDC.
Helping propel this market, which last year generated $5.5 billion, is a transition from using virtualization software solely in high-end and mainframe computers to making it available for lower-cost systems running x86 and x64 servers.
Virtualization software allows users to take a single server and load it up with multiple operating systems. And that, in turn, lets users string together low-cost servers that can more quickly and easily take over an operating system's functions if one of the servers fails or is overtaxed.
While virtualization services largely revolve around supporting customers' initial software implementations, education and training, IT consulting and systems integration are expected to garner faster growth in virtualization services over the coming years, IDC predicts.
An increasing number of virtualization software makers are entering the market, posing a greater competitive threat to market leader VMware, according to a Forrester Research report released Monday. Microsoft, XenSource and others are developing "viable alternatives," Forrester notes.
But VMware, a subsidiary of storage company EMC, announced plans earlier this month to go public, which will help it fund development of more competitive products. And Forrester notes that it still expects VMware to continue its lead in server virtualization for years, because its competitors have been slow to enter the market.
Microsoft and XenSource aren't expected to be serious VMware challengers until 2010, according to Forrester. And by then, the virtualization services market may be poised for another substantial leap.
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