Tiny XenSource doubles customers, battles VMWare
By Jim Finkle
BOSTON, June 29 (Reuters) - XenSource Inc., a tiny rival to the VMWare software business that EMC Corp. (EMC.N) plans to take public, has doubled its customer base over the past three months and expects further strong growth, its vice-president said on Friday, though the client list still only numbers about 500.
Privately held XenSource started selling its Windows-based software at the end of last year, taking on VMWare, one of the fastest-growing companies in Silicon Valley, whose sales have doubled on a year-on-year basis in recent quarters.
Both XenSource and VMWare sell so-called virtualization software, which boosts the efficiency of business computers by harnessing processing power that would otherwise go unused.
Customers save money because the software reduces the number of computers needed to run data centers.
EMC is preparing to take VMWare public in what analyst say could be one of the hottest IPOs of the year.
XenSource Vice President John Bara said the startup expects to have between 1,000 and 1,500 customers by the end of the year.
XenSource, founded in December 2004, is now getting ready to roll out a new version of its flagship product in August.
While its current software lacks key features in VMWare's main products, the new version will narrow the technology gap between the two, Bara said.
The bulk of the company's customers are using the product on just a handful of servers, though some have deployed it more widely, "on 20, 30, 50, even a few hundred servers," he said.
"Most of the customers are in the early days. They are trying the product out," Bara said.
His comments followed a XenSource meeting on Thursday with analysts who cover the software industry for research firms.
The company did not make revenue projections and Bara would not comment on sales.
Gartner analyst George Weiss, who was at Thursday's meeting, said a rough estimate would be about $7 million for the year.
VMWare, by comparison, reported sales of $704 million last year and it has some 20,000 customers, including all of the companies in the Fortune 100 and 84 percent of the Fortune 1,000.
Microsoft Corp (MSFT.O) plans to introduce a similar product next year, dubbed Windows Server Virtualization.
About half of XenSource's customers are outside of the United States and about a quarter are large companies, including JPMorgan Chase, Ask.com, Rollins Corp. and Bechtel Corp., Bara said.
XenSource's key investors include venture capital firms Kleiner Perkins Caufield & Byers, Sevin Rosen Funds, Accel Partners, and New Enterprise Associates.
