VMware rocket IPO and XenSource rumours show virtualisation power

Virtualisation x86 pioneer floats while Citrix is linked with XenSource purchase

Virtualisation pioneer VMware helped restore confidence in technology stocks today as speculation mounted about rivals being snapped up.

VMware listed for $29, making for a $959m valuation at the top end of expectations and reflecting high expectations for x86 virtualisation. The stock then soared in early trading to reach $55. The optimism could also help assuage fears expressed by companies such as Network Appliance that early signs of softening in the market are apparent.

A sideshow to the IPO was provided after Credit Suisse which last Friday issued a research note (PDF) suggesting that Citrix could be in the market to acquire a role in virtualisation.

In the document, entitled Is Citrix Making A Broader Virtualization Play?, authors wrote: “Citrix may be interested in acquiring core virtualisation infrastructure and management tools as part of a strategy to broaden its product portfolio to better address the next-generation datacentre.”

The authors go on to predict that “one of the Xen developers -- either XenSource or Virtual Iron --could represent an attractive target for Citrix, as we believe that hypervisor and associated management solutions would be complementary to Citrix’s long-term vision of offering scalable application and desktop delivery.”

The report suggests that “if Citrix can develop robust management software through increased R&D while leveraging the open source Xen hypervisor, Citrix could establish itself as a strong competitor in both desktop and server virtualization within two to three years.”

However, in an interview last month with IT Week, XenSource founder Simon Crosby and international sales director John Glendenning, a former Citrix executive, said privately-held XenSource was not seeking to be acquired or to float in the near future. XenSource also stated that ti wanted to clear space for management tools providers to participate. Both Citrix and XenSource declined to comment today.

The rapid changes to the virtualisation landscape come as XenSource is beginning to make waves through virtualisation code embedded in Linux distributions.

While mostly used to virtualise Linux instances, Casio Computer last week said it is using Xen in Suse Linux Enterprise Server to virtualise Windows servers.

Also last week, Red Hat said that telco subsidiary Swisscom IT Services is using Xen under Red Hat Enterprise Linux (RHEL) 5 to improve hardware utilisation.

Red Hat Europe vice president Werner Knoblich said, “Because we made virtualisation ‘free’, people are trying it out. I would say that all customers that have had Linux in production for two, three or four years are testing and evaluating virtualisation.”

Knoblich said more customers are virtualising Windows using Xen.

“At the beginning we thought that customers would not mix and match OSes and we got proved wrong."

Red Hat plans to issue a RHEL 5 update later this year with paravirtualised drivers to improve Windows performance.