Citrix Systems plans to acquire virtualisation vendor Xensource for approximately US$500 million to enable the application delivery software vendor to enter both the server and desktop virtualisation markets.
Citrix made the announcement on Wednesday, the day after Xensource's rival VMware launched an initial public offering.
Virtualisation enables companies to cut down on the number of the computers they use by allowing each machine to function as a number of virtual machines running different operating systems.
Rumours had been circulating over the past few days that Citrix would buy Xensource, which both provide commercial and open-source flavours of its virtualisation technologies.
Already, the boards of directors of both Citrix and Xensource have approved the deal. The purchase is subject to regulatory conditions and Citrix expects to close it in the middle of the fourth quarter of 2007, according to David Henshall, chief financial officer at Citrix.
The two companies have complementary product lines, Mark Templeton, president and CEO of Citrix, said during a morning conference call. "In short, Xensource and Citrix are a perfect fit," he added.
Citrix hopes to generate over $50 million in revenue through Xensource's virtualisation products by 2008, he said, and then take a significant share of the overall virtualisation market by 2011.
Both companies already have strong partnerships with Microsoft and intend to deepen those relationships once they become a combined entity. Citrix and Microsoft work together in the areas of Windows application delivery, application networking and branch office infrastructure.