SiliconBeat

It’s one day after the VMware IPO stoked nostalgia across Silicon Valley for the madness of 1999. And what do we have here? Somebody just bought a little Palo Alto company you never heard of for $500 million.

In an 8-K filed Wednesday, Citrix Systems of Fort Lauderdale, said it has acquired XenSource of Palo Alto for $500 million, a figure that is a mix of cash, stock, and the assumption of $107 million in debt. An analyst for The 451 Group, which closely follows tech M&A,  said the deal was a bid by Citrix to remain competitive with VMware:

“The purchase price of XenSource, the maker of Xen hypervisor, was undoubtedly inflated by the platinum valuation given to VMware. XenSource is currently running at little more than $1m in annual sales, though Citrix expects to push that to $50m next year. The Palo Alto, Calif.-based startup has raised some $38m in three rounds, starting with a $6m Series A in January 2005.”

But here’s where things get a little cozy. According to an 8-K filed on Wednesday by Citrix, the company disclosted that one of its directors, Steve Dow, also happens to be a general partner at Sevin Fosen funds, a venture firm in Palo Alto. Sevin just happens to be one of the leading investors in XenSource. Although Dow doesn’t directly have any money invested in XenSource, he will still receive his share of money that is allocated to all Sevin partners in the normal course of such things.

So much will Dow get? According to Citrix’s filing, Dow could get as much as $1.9 million from the deal. The company also notes that Dow did not attend the board meeting to approve the deal and did not cast a vote on it.