As you have no doubt heard by now, Citrix announced its acquisition of open source virtualization company XenSource today for $500m (press release).

We issued a TechDealmaker QuickTake early this morning concerning this news entitled, “Citrix pays $500m for XenSource, squares off against VMware” (login required) by fellow 451 analysts William Fellows, Rachel Chalmers, Brenon Daly, and John Abbott. You can also read our take on the acquisition in three news articles: “Citrix Buying VMware Rival for $500M,” by Michael Liedtke (AP) posted on the San Francisco Chronicle website, “Will Microsoft Buy the New Citrix?,” by Peter Galli (eWeek), and “Citrix Challenges VMware with XenSource Buy,” by Richard Koman (CIO Today).

Regarding the analysis of this acquisition, I defer to my colleagues who follow this space more closely than I do, but I wanted to make a point about the acquisition price and to what extent this can be applied to the open source vendor community. The multiple that Citrix paid for XenSource was quite high - $500m based on $3m or less in annual sales (more than 150x). Should open source vendor executives be salivating at the future prospects, based on this multiple? No.

I think that it’s clear that the multiple is tied to XenSource’s product focus, virtualization, and not to the fact that Xen is released under an open source license (nor its existing customer base). This acquisition closely follows the VMWare IPO - virtualization is hot and there aren’t many players. Citrix wanted to play, and XenSource was one of a small number of virtualization M&A targets available. When looking at the multiples for recent open source acquisitions (e.g. JBoss and Sleepycat), there is a significant gap here. While this is exciting news for the XenSource founders, I don’t think the open source vendor community should get caught up in this excitement. It wasn’t open source that provided the 150x multiplier.