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Citrix invests in desktop virtualisation startup

Virtual Computer is going after a part of the desktop virtualisation market that Citrix has not yet addressed, analyst says.

Citrix has spent the past year and a half redefining itself as a virtualization company, first purchasing the desktop and server virtualization vendor XenSource and then placing the "Xen" name on its flagship application delivery software to reflect a focus on virtualization.

Now Citrix is betting on a desktop virtualization start-up called Virtual Computer, which was founded in November 2007, to focus on the provisioning, publishing and patching of desktop and laptop operating systems. Virtual Computer, whose NxTop software is in beta and is based on open source Xen software, exited stealth mode in September and on Monday is announcing Citrix as a key investor.

At a time when venture investment in the IT industry has hit its lowest point in a decade, Virtual Computer has snagged $15 million in a funding round led by Highland Capital Partners and Flybridge Capital Partners. Citrix continued an undisclosed but "significant" portion of the $15 million, says Virtual Computer CEO and co-founder Dan McCall. Virtual Computer previously secured $6 million from Flybridge and Highland early in 2008.

"This is an interesting and exciting young company and we have a shared vision abut what's going on in the space," says Andy Cohen, Citrix's senior director of strategic development. "We think it's important to help support people who are coalescing around Xen-based technologies."

When asked if this might be the first step toward acquiring Virtual Computer, Cohen said, "We own a small percentage of them now. Because of the shared vision ... that's certainly a possibility."

Although Citrix and Virtual Computer both make desktop virtualization products and could potentially compete against each other, Virtual Computer is going after a part of the market that Citrix has not yet addressed, Cohen says.

Virtual Computer's NxTop software is a bare metal, or "Type 1" hypervisor, whereas most desktop virtualization products are "Type 2" and thus run on top of an operating system, McCall says. Type 2 hypervisors are sometimes vulnerable to various security, management and performance problems, according to McCall.

NxTop creates a layer of independence between the hardware and operating system. The software allows central management of PCs just as other virtualization products do, but McCall says Virtual Computer provides a "loosely connected" model in which PCs can be easily customized and run smoothly even when disconnected from the central server.

NxTop pushes a base operating system image out to desktops and laptops, and then customizes individual devices by adding from a list of optional applications. Patches are delivered centrally, but if a patch fails then each device's desktop image automatically rolls back to the previous version to prevent downtime.

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Although Virtual Computer relies on virtualization software, the company is describing itself more broadly as a PC life-cycle management vendor.

"In the centralized server, you create one operating system," McCall says. "We try to make it as easy to manage 1,000 computers as it is to manage one."

Citrix currently does not offer a Type 1 or Type 2 desktop hypervisor, instead using a server-based virtual desktop infrastructure, which is completely centralized and streams the entire virtual machine out to clients, Cohen says.

However, Citrix recently began collaborating with Intel to create a Xen-based Type 1 desktop hypervisor, which would be more along the lines of what Virtual Computer has developed.

Virtual Computer's software can virtualize Windows and Linux, letting multiple operating systems run on the same desktop. The vendor's product does not work on thin clients, and does not work with Macs because of licensing issues.

When asked if Citrix and Virtual Computer might forge a go-to-market partnership, Cohen said the relationship is still in its "early stages." Citrix made the investment in Virtual Computer this month after being impressed by the company at last September's VMworld conference.

"The Citrix guys approached us after we launched our product at VMworld and really were interested in how we were doing things and were very attracted to the technology," McCall says.

McCall was previously co-founder of Guardent, a security services vendor acquired by VeriSign in 2004. He stayed on at VeriSign for a couple years as vice president of corporate development before founding Virtual Computer.

McCall's co-founder is CTO Alex Vasilevsky, who was previously co-founder and CTO of Virtual Iron, another Xen-based virtualization vendor. McCall says Virtual Computer plans to make its product generally available by the end of March.