Companies using Windows "Longhorn" Server and its virtualization technology will be able to run multiple instances of Windows, Linux and Xen-enabled Linux operating systems simultaneously on a single server. Microsoft will also provide technical support when Longhorn and its hypervisor become available by the middle of 2008.

"This is really good from a Xen standpoint, as it allows them to create a multi-operating system virtualization platform," said Charles King, an analyst at Pund-IT Inc. in Hayward, Calif. "And it is smart for Microsoft to get with the program and acknowledge that Linux is not going to go away from the corporate data center."

In April, XenSource agreed to license Microsoft's Virtual Hard Disk format. That allows its own XenEnterprise "hypervisor" -- the technology actually used to create multiple guest operating systems, also known as virtual machines -- to import virtual machines created under Microsoft's current Virtual Server hypervisor software.

XenEnterprise is expected to be released in the third quarter of this year. With it, Xen actually competes with Microsoft, as well as market leader VMWare Inc., a fact that Frank Artale, vice president of business development at Palo Alto, Calif.-based XenSource, readily acknowledged.

"But our stated goal is to add value around the hypervisor," he said. "So we want the largest potential market for that, which is by enabling Linux as a guest OS everywhere."