Open-source M&A: The scorecard to date

What is the value of an open-source asset? Over the past several years, and most recently with SpringSource, we've seen a number of open-source companies acquired at valuations of 10x or better. Did the buyers get their money's worth?

It's a tricky question to answer--and likely depends upon far more data than I have at my disposal. It also depends on the acquiring company executing, which has not been the case with Yahoo (which bought Zimbra) or Sun Microsystems (which bought MySQL). No open-source company can offer a panacea for an acquiring company's failure to execute.… Read more

Investor reveals secret to $1.6 billion in open-source success

No other investor has had as much success in open-source software as Peter Fenton, general partner at Benchmark Capital.

A competitive triathlete, Fenton has turned the standard marathon of open-source business-building into a sprint, churning out four big open-source sales--JBoss ($350 million), Zimbra ($350 million), XenSource ($500 million), and SpringSource ($420 million)--while most investors have yet to turn a profit on any.

Not that Fenton is a one-trick pony. He also just sold FriendFeed to Facebook and sits on the board of Twitter. It's fair to say that Fenton can now afford a second Aston Martin.

But Fenton … Read more

Q&A: Citrix exec says cloud to carry Xen against VMware

Citrix aims to beat VMware at virtualization. A year ago it bought XenSource, the company created by the founders of the Xen open-source hypervisor, and switched the Citrix business focus to virtualization.

Citrix made XenServer, the commercial system based on Xen, central to its strategy, and applied a Xen brand to other Citrix products involved in delivering applications to desktops. XenSource staff gained senior positions at Citrix and have been setting the company's future direction.

Ian Pratt, the original project leader of Xen and a founder of XenSource, remains a Fellow of King's College, Cambridge, but is now … Read more

Open source after the M&A honeymoon

InformationWeek's Charles Babcock takes a fascinating look into the pros and cons of open-source mergers and acquisitions, and comes up with some interesting perspectives in the process. In sum, if you want to acquire an open-source software company, you'd better be very clear about what you're buying, and how you're going to pull value from it.

Squeeze too hard, and you risk alienating the community of customers, developers, and interested onlookers that made the open-source project successful. Squeeze too lightly, and you end up being popular and poor.

There is no one-size-fits-all approach to acquiring open-source projects, as the article points out. Indeed, sometimes a private equity buyout of sorts ends up yielding the most value.

What do I mean by "private equity buyout?" Consider XenSource.

XenSource was bought for the princely sum of $500 million despite offering virtually nothing in the way of revenue and a clear business model. Under Citrix's proprietary hand, however, XenSource has gone from pocket change to what XenSource CTO Simon Crosby says will be $50 million in revenue this year. Crosby tells InformationWeek that "XenSource has close to 3,000 customers, compared with 1,800 at the time of the acquisition." Considering that it made less than $10 million or so in sales off those 1,800 "customers," XenSource may well be thanking the proprietary gods right now that Citrix gave it a new way to monetize adoption.

But this doesn't tell all of the story on open-source M&A. If it were a matter of "buy open source, make it proprietary," more would have done it by now. Some, like Red Hat, actually go in the opposite direction, as it did with Sistina, taking proprietary code and open-sourcing it. But the JBoss example is even more interesting, because it involves taking a pre-existing open-source project and trying to improve its financial yield by changing its business model.… Read more

XenServer is alive and well

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 … Read more

Open Season Episode 11: Some stuff happened and we did a podcast about it

If you've got a half-hour, we've got a podcast for you. This week on Open Season, Matt Asay, Ashlee Vance and I talk about a whole lot of nothing, including:

My MacBook Air (I am still in love) XenSource Sun Lies and damn lies about open source on Intel's website We made an attempt on this 2 weeks back but our petard was hoisted by a shoddy conference bridge. Technology is only occasionally my friend.

Open Season Episode 11

Citrix introduces its virtualization architecture

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 … Read more

Citrix strips XenSource of virtualization, open source...everything

Just what did Citrix buy when it bought XenSource? As Dana Blankenhorn analyzes, Citrix appears to be in a dead sprint to remove any and all value from open source, virtualization buzz, etc. that it may have acquired when it bought XenSource:

And now, a quarter after the deal was closed, Citrix officials have indicated that they will use the hot XenSource branding, but de-emphasize its identity as a virtualization company. Citrix's flasgship Presentation Server has been renamed to XenApp Server, a fitting title considering its function as an application delivery platform. But it has no XenSource code.

Citrix … Read more

Novell ready for acquisitions?

Novell got a nice influx of cash when they made their deal with the devil (er, Microsoft) and BusinessWeek says that the company is now ready to start spending some of that cash on acquisitions.

The problem is that there aren't a whole lot of companies that are complementary in a meaningful way.

Raven Zachary at 451 Group suggests that Novell might be interested in one of the open source system management vendors like Hyperic and Zenoss. This makes sense but won't bring meaningful revenue--and both of those companies will be worth a lot more down the road (… Read more

New Virtual Iron CEO wants spotlight

Virtual Iron, a start-up trying to commercialize the open-source Xen virtualization software, has just gotten a new chief executive, and he wants to grab some of the attention lavished on rivals in the suddenly high-profile market.

The new CEO is Ed Walsh, who led Avamar Technologies, a company focusing on economizing storage by reducing duplicative data, which EMC acquired in 2004. John Thibault, who was named Virtual Iron's CEO in 2005, will remain executive chairman of the 73-employee Lowell, Mass.-based company, Virtual Iron plans to announce Monday.

Virtual Iron has been in the virtualization business for three years, … Read more