The chatter around the Open Source blogosphere on the XenSource acquisition is almost deafening. Can’t begin to track it all but a couple of posts are worth highlighting…
Matt Asay pegs this as a comp for other Open Source acquisitions that might range from 500x to 50x. Either way a huge multiple.
But wait, maybe not so cut and dry….
SourceFire trades at roughly 4.5x ttm revenue and was up a penny today. So, what’s with that?
Raven has a more measured perspective and discusses the strategic aspects of the acquisition, which discounts the applicability of the comp to other Open Source companies.
My feeling is that Raven’s view is closer to reality. Multiples of revenue are really only meaningful as accurate comps when business are more mature and their economics are better understood. Prior to that, it’s anyone’s guess what someone will pay. This was obviously a strategic asset purchase.
The real lesson here for other Open Source companies is that they’ve got to figure out how to maneuver their company into this kind of strategic nexus. Once they’ve done that, they control their own destiny. Sell at a huge multiple, stay private and grow, maybe acquire smaller proprietary companies, or IPO. Either way a great outcome for all.
One other point that I think is worth mentioning is that just because the roots of a company are in Open Source, that doesn’t mean the future will be the same. It’s discussed here, where they mention that the Xen project will be spun off separate from Citrix.
“Citrix is also committed to maintaining and growing its support for the Xen open source community, led by XenSource co-founder and Xen project leader, Ian Pratt. Between now and the close of the acquisition, XenSource will work with the key contributors to the Xen project to develop procedures for independent oversight of the project, ensuring that it continues to operate with full transparency, fairness and vendor neutrality â?? principles that are critical to the continued role of Xen as a freely available open source industry standard for virtualization.”
My interpretation of this is that Open Source might have a much less prominent role going forward.
Only time will tell how the acquisition of Open Source companies by proprietary companies is going to impact the landscape of Open Source. So I’m not ready to predict anything as certainly as Matt does here.