Extending a partnership first struck in 2004, Sun will now resell and install Windows on its x86-based servers. For Sun, the deal is a way to drive broad adoption of its technologies. “One hundred percent of Sun’s customers use both Solaris and Windows,” said Sun Executive Vice President John Fowler. “We have an opportunity to extend our technology leadership in this critical area with customers that we share.”

For Microsoft, it’s a way to better compete in the virtualization market. Under the terms of today’s agreement, both companies pledged to optimize their server operating system for virtualization of the other’s software. And that’s an important issue for Microsoft. As Microsoft Watch’s Joe Wilcox notes, Windows Server 2008 and Microsoft’s next-generation Viridian virtualization technology have both been delayed. Said Wilcox, “Virtualization interoperability provides a place for Windows Server 2003 on Solaris and an opportunity to better position Windows Server 2003 for consolidation of Solaris servers.”

Extending a partnership first struck in 2004, Sun will now resell and install Windows on its x86-based servers. For Sun, the deal is a way to drive broad adoption of its technologies. “One hundred percent of Sun’s customers use both Solaris and Windows,” said Sun Executive Vice President John Fowler. “We have an opportunity to extend our technology leadership in this critical area with customers that we share.”

For Microsoft, it’s a way to better compete in the virtualization market. Under the terms of today’s agreement, both companies pledged to optimize their server operating system for virtualization of the other’s software. And that’s an important issue for Microsoft. As Microsoft Watch’s Joe Wilcox notes, Windows Server 2008 and Microsoft’s next-generation Viridian virtualization technology have both been delayed. Said Wilcox, “Virtualization interoperability provides a place for Windows Server 2003 on Solaris and an opportunity to better position Windows Server 2003 for consolidation of Solaris servers.”

Five hundred million dollars. Quite a sum–especially when XenSource is burning through $15 million a year in expenses, but generating just “a few million in revenues,” according to Citrix CFO David Henshall.

That said, Citrix expects the server- and desktop-virtualization market to balloon to $5 billion by 2011, and this acquisition will put it in a good position to carve itself a piece. Said Peter Levine, CEO of XenSource: “This move is not about competing for the 5% of the market that is already being served. It’s about steering into the 90% white space that is wide open, both at the server and in new emerging opportunities at the desktop.”

Course, that space won’t be wide open for long. Microsoft is belatedly developing its own virtualization product called Viridian. And when it finally debuts the virtualization land grab will really begin. As the research outfit 451 Group told its clients: “The virtualization market now revolves around three players: market darling VMware; Citrix’s combination of young blood and old money; and the (potential) threat of Microsoft’s Viridian, slated to ship in Q3 2008. Both Citrix and VMware have a 12-month window of opportunity before Microsoft shows its full hand.”

Little wonder the underwriters of VMware’s IPO exercised their overallotment option to purchase an additional 4,950,000 of the company’s shares.

The company’s performance yesterday “tells you that even in a market where stocks are selling off and investors have a negative view, that VMware stands out as a stock to own,” said Jefferies & Co. analyst Katherine Egbert. “The company is on a trajectory that mirrors Microsoft, Oracle and Veritas in the early days.”

Sure. But for how long? After all, VMWare may be best in breed, but it’s best in breed with limited competition. “Basically, for the last five to six years, VMware has had no competition,” Tom Bittman, a vice president and chief of research at Gartner, told eWeek. “The first real competition came when you had vendors developing Xen, open-source products, and then you are going to have Microsoft’s Viridian in beta later this year. I think Microsoft’s product is going to be a serious competitor to VMware, and Microsoft has also really improved its management technology.”

Little wonder the underwriters of VMware’s IPO exercised their overallotment option to purchase an additional 4,950,000 of the company’s shares.

The company’s performance yesterday “tells you that even in a market where stocks are selling off and investors have a negative view, that VMware stands out as a stock to own,” said Jefferies & Co. analyst Katherine Egbert. “The company is on a trajectory that mirrors Microsoft, Oracle and Veritas in the early days.”

Sure. But for how long? After all, VMWare may be best in breed, but it’s best in breed with limited competition. “Basically, for the last five to six years, VMware has had no competition,” Tom Bittman, a vice president and chief of research at Gartner, told eWeek. “The first real competition came when you had vendors developing Xen, open-source products, and then you are going to have Microsoft’s Viridian in beta later this year. I think Microsoft’s product is going to be a serious competitor to VMware, and Microsoft has also really improved its management technology.”