The plan to integrate the technologies "is good from a Xen standpoint," said Charles King, an analyst at Pund-IT Inc. in Hayward, Calif. The deal will enable XenSource to create a multi-operating-system virtualization platform, King said. He added that it's also a smart move "for Microsoft to acknowledge that Linux is not going to go away from the corporate data center."

Better Performance Microsoft already lets companies using its Virtual Server 2005 software on top of Windows Server 2003 run multiple instances of Windows and Linux as guest operating systems, said Jeff Price, senior director of the Windows Server group. But as a result of Microsoft's alliance with XenSource, the Longhorn release of the server operating system should provide better performance and more manageability, he said. For now, there is only one Xen-enabled Linux distribution available: Novell Inc.'s SUSE Linux Enterprise Server 10 software, which the company officially rolled out last week. Red Hat Inc. is expected to follow with a Xen-enabled update to Red Hat Enterprise Linux by year's end.

In April, Palo Alto, Calif.-based XenSource agreed to license Microsoft's Virtual Hard Disk format. That allows its upcoming XenEnterprise "hypervisor" -- the technology actually used to create multiple guest operating systems -- to import virtual machines created under Microsoft's current version of Virtual Server.

XenEnterprise is expected to be released this quarter. With it, the Xen technology will also compete with Microsoft's virtualization offerings, as well as with products from market leader VMware Inc.

Gordon Haff, an analyst at Illuminata Inc., said Xen is "still quite new technology that will take some time to prove itself out in the market." The deal between Microsoft and XenSource should help in that regard, Haff added.