Citrix Systems has announced it has completed the acquisition of XenSource, a privately held enterprise virtualization software vendor.

The purchase price for the transaction was approximately $US500 million payable in a combination of cash and Citrix common stock and comes two months after the acquisition was first announced. Citrix sees the move into the server and desktop virtualization markets through XenSource as complementary to its existing application virtualization offerings.

Citrix expects the virtualization market to grow to nearly $5 billion over the next four years.

"By acquiring XenSource, Citrix is now the only company to offer organizations an end-to-end application delivery infrastructure that leverages the method of application, desktop and server virtualization best suited for the dynamic delivery of applications to any user," according to the company. The XenSource team and products will now form the core of the new virtualization and management division of Citrix led by XenSource CEO Peter Levine, who will report to Citrix president and CEO Mark Templeton.

Citrix also announced two new product lines. The Xen server virtualization engine has been rebranded to Citrix XenServer. The new product line ranges from Citrix XenServer Express Edition, a single-server solution available for free download, to the Citrix XenServer Enterprise Edition, formerly XenEnterprise.

The second is Citrix's entrance into the desktop virtualization space with Citrix XenDesktop due to ship in the first half of 2008.

According to Citrix, XenDesktop will "overcome the challenges of cost, complexity and user experience that have prevented virtual desktops from becoming a mainstream enterprise reality".

XenDesktop will be an integrated desktop delivery system and move beyond the "limitations" of existing virtual desktop infrastructure (VDI) point solutions to ensure the simple, secure, and fast delivery of Windows desktops to any office worker over any network.

Citrix also used the announcement to reiterate its commitment to maintaining and growing support for the independent Xen open source community which develops the underlying virtualization engine used by XenSource.

The open source Xen project, which includes significant contributions from companies like Intel, AMD, HP, IBM, Novell, and Dell, is led by XenSource co-founder, and new Citrix employee, Ian Pratt.

Since news of the acquisition, XenSource has worked with contributors to the Xen project to develop procedures for independent oversight of the project, ensuring that it continues to operate with full transparency and vendor neutrality.

Citrix's Templeton said the XenSource products, team, and culture are a great addition to the Citrix family.

"The combination of Citrix and XenSource brings together application, desktop and server virtualization to deliver more innovation, choice and flexibility to the market, including our installed base of more than 200,000 customers worldwide," he said.