CRT Capital’s Ashok Kumar offers a provocative take this morning about Citrix’s (CTXS) plan to take on VMware (VMW) in the virtualization market by acquiring XenSource for $500 million.

To put it bluntly, Kumar does not think that Citrix is going to reach its goals. “Citrx’s acquisition of XenSource is an exploration of how a successful software company has underestimated the difficulties of entering a tangential market,” he writes. “Half a billion dollars is just the beginning of the investment Citrix will need to pull off its vision of a working system software ’stack.’ Ironically, the ’stack’ is meaningless to customers. VMware’s success has nothing to do with a stack, but instead on the opposite concept - widespread partnering.”

As I noted in a recent Technology Trader in the print edition of Barron’s
, one of VMware’s biggest advantages is that it has very little current competition. The key rivals at the moment are Microsoft (MSFT), which is working on a virtualization program called Viridian which is late and now supposed to ship next year, and XenSource. “VMware will probably not be able to maintain its extreme domination in the server virtualization market forever,” Kumar writes, “but there is not other realistic competition right now. Microsoft is far behind and everybody else, including XenSource, is a speck on the horizon.”

Kumar notes that Citrix has forecast that the XenSource business can grow to $50 million a year in revenue next year from $5 million this year; he thinks that “it should feel happy if it achieves $15 million.” He says that for Citrx, “future success depends heavily on Citrix’s ability to maintain an R&D budget to keep pace with VMware and Microsoft - and that does not seem to be in its current plans.”

As part of his call today, Kumar raised his price target for EMC to $25 from $22; he repeated his Buy rating on the stock. As Tiernan Ray noted in the magazine, EMC shares have had a surprisingly subdued reaction to the rapid post-IPO jump in VMware’s shares. EMC’s 86% stake in VMware is now worth $20.7 billion, which represents just over half of EMC’s current $41 billion market cap.

EMC today is off 41 cents at $19.57; VMware is up $1.22 at $72.52; Citrix is down 31 cents at $35.79.

Read the original post on the Barron's blog, here.