Feeds

Citrix: A long run to VMware

XenDesktop's big quarter

Designing a Defense for Mobile Applications

What a contrast Citrix Systems and VMware make in the server and desktop virtualization arenas. And who would have guessed that Citrix would have been the more profitable company in the most recent quarter?

But it's true. Even though VMware is a somewhat larger company, Citrix trumped them thanks in large part to its vast installed base of 230,000 enterprise customers using products such as its XenApp middleware (formerly known as Presentation Server) and a slew of other software gadgets.

In the second quarter ended June 30, Citrix had sales of $392.8m, up a meagre three-tenths of one per cent when compared to the same quarter last year. Product license sales plummeted by 15.5 per cent in the quarter to $129.7m, but thanks to that legacy customer base, license update sales rose by 8.8 percent to $149.3m.

Citrix's growing online services offerings accounted for $75.35m in sales, up 18.3 per cent, and technical services came in at $38.45m, up 3.1 per cent. Despite having to take a $2m restructuring charge resulting from layoffs announced in January, the company nonetheless was able to boost net earnings by 22.7 per cent to $42.5m.

VMware, by contrast, yesterday said that its sales were down one-tenth of a per cent to $455.7m and its net income was driven down by the cost of doing business by 37.8 per cent to $32.5m.

Citrix is trying to take on VMware on a number of different fronts. The company has enlisted Microsoft's Hyper-V and its Windows monopoly money as a means of peddling the Essentials family of hypervisor management tools that also work on its own XenServer.

This collusion between competitors helps Citrix and Microsoft take on VMware's technically slick but overpriced ESX Server 4.0 and related vSphere 4.0 tools, much as commercial Linux distro Novell has done deals with Microsoft to peddle its SUSE Linux to Windows shops so that both vendors can blunt the attack of Red Hat, the market leader in Linux just like VMware is the market leader in virtualization.

David Henshall, chief financial officer at Citrix, said in a conference call with analysts and reporters that revenues from desktop and server virtualization products - meaning the XenDesktop virtual PC hosting software plus the XenServer server hypervisor and the tools to manage it - saw a 250 per cent bump in the quarter compared to the prior year, and were up 50 per cent sequentially from the first quarter of 2009.

Henshall didn't break down desktop versus server sales - one reason why being that XenDesktop is still a server-based product in as much as it runs virtual PCs back in the data center and lets users link into them from the network.

Citrix did not provide numbers, but in the first quarter the XenDesktop and XenServer products together accounted for $7m in sales, which means sales of these products in Q2 came to $10.5m. While that growth is good, the vast majority of VMware sales are for server hypervisors and tools. Citrix has a long, long way to go to dent VMware's moneymaker.

Part of Citrix's strategy since it announced XenServer 5.5 in February has been to give away a rather feature-complete XenServer tool and then charge extra for the Essentials tools that add various capabilities to the hypervisor such as virtual machine jukeboxing, high availability, and so on.

VMware might be feeling a few bruises from this strategy, since Citrix has had over 100,000 downloads of the XenServer 5.1 product since it started giving it away as a means of laying the groundwork for sales of the XenServer 5.5 and Essentials tools, which started shipping on June 19.

"Total downloads and product activations were just amazing, beating our best estimates by a very wide margin," said Citrix president and CEO Mark Templeton during the call.

Still, letting people monkey around with freebie software isn't the same thing as making money.

It looks like XenDesktop, not XenServer, was the moneymaker for virtualization tools in Q2. Henshall said that ten customers had made commitments to use XenDesktop to deploy more than 1,000 seats during the quarter, with one of the deals involving a seven-figure license deal. (This is very likely the 40,000-seat XenDesktop setup that partner CSC sold to one of its services customers.) Citrix sold XenDesktop to 470 customers in the quarter, of which 200 were new to Citrix.

Citrix reckons that anywhere from 400 to 500 million PCs worldwide could go virtual in the next couple of years - which is one reason why it's working with Intel to create a Xen-based, bare-metal hypervisor for PCs that will offer businesses the kind of isolation and security they want on corporate PCs and laptops, and that they can't get today in a desktop hypervisor from Citrix.

Not everyone wants to have centrally controlled and hosted PCs, as XenDesktop offers. Some people want multiple partitions on a PC, and maybe want to stream some corporate applications down to one secure partition, allowing applications to run locally and not be affected by network and latency issues.

And to the extent that this works, XenClient, as this bare-metal hypervisor is called, will undermine not only XenDesktop, but also the XenApp/Presentation Server business.

In the second quarter, sales of XenApp and Presentation Server application virtualization products fell by 8 per cent to $245m, but this drop seems to be more about customers being stingy with their licenses and renewals (possibly as they cut employees) than the effect of desktop virtualization. But that will change.

The question for Citrix is whether it can ramp up XenServer, XenDesktop, and XenClient sales fast enough to make up for sinking XenApp sales - if companies do indeed start transitioning away from server-based PC apps and to virtual PC applications running on virtual desktop operating systems either locally or at a data center.

Citrix is playing the best hand it can put together, just like Novell. Time will tell if either of them can take on their respective opposing juggernauts and make a real run for the money, not just a technical race. ®

The smart choice: opportunity from uncertainty

More from The Register

next story
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
Airbus promises Wi-Fi – yay – and 3D movies (meh) in new A330
If the person in front reclines their seat, this could get interesting
UK Parliament rubber-stamps EMERGENCY data grab 'n' keep bill
Just 49 MPs oppose Drip's rushed timetable
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
Samsung threatens to cut ties with supplier over child labour allegations
Vows to uphold 'zero tolerance' policy on underage workers
Dude, you're getting a Dell – with BITCOIN: IT giant slurps cryptocash
1. Buy PC with Bitcoin. 2. Mine more coins. 3. Goto step 1
ITC: Seagate and LSI can infringe Realtek patents because Realtek isn't in the US
Land of the (get off scot) free, when it's a foreign owner
prev story

Whitepapers

Reducing security risks from open source software
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Application security programs and practises
Follow a few strategies and your organization can gain the full benefits of open source and the cloud without compromising the security of your applications.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Consolidation: the foundation for IT and business transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.