kidaroMicrosoft likes the flavor of Falafel – that’s one explanation for its second acquisition of an Israeli startup in two weeks.

Following the sweet exit of YaData, MSFT goes at it again and this time it’s Kidaro’s turn, an Israeli developer of desktop virtualization software for enterprises. The sum of the acquisition was undisclosed, but Globes says Israeli high tech sources estimate the deal to be in the 90 to 100 million dollar range.

Kidaro was founded in 2004 by three Israeli entrepreneurs:Ran Kohavi (serves as VP of biz dev), Itzik Levy (VP of R&D) and Ran Oelgiesser (VP of marketing). Two out of the three have successfuly sold companies in the past. The company has raised $14 million to date, from backers who are happy to report an exit today: Storm Ventures, Genesis Partners and most recently Opus Capital, who joined the other two in December of 2006. The investors will receieve a 500% return on their initial investment.

In the official press release from IBM, Shanen Boettcher, GM of Windows product management at Microsoft, said:

“The acquisition of Kidaro is an important component of our virtualization strategy, and it delivers a powerful new tool to help enterprise customers optimize their desktops. Virtual PCs can help businesses address a number of challenges around application compatibility, mobility and business continuity. Kidaro’s seamless user interface and management capabilities allow enterprises to more easily use and manage Virtual PCs. Incorporating Kidaro’s innovative solutions into the Microsoft Desktop Optimization Pack further enables virtualization across the enterprise, and is another example of how we are helping customers keep up with the changing needs of their business.”

Globes also added that Kidaro’s acquisition wasn’t really planned. The company was progressing well, and there were no real plans to sell it. But unlike Yahoo, Microsoft’s offer, which came as a surprise (according to a source close to the company), was one they couldn’t refuse.

VMware Inc. [VMW], which competes with Microsoft on the virtualization front, acquired Thinstall Inc. for an undisclosed amount in January. According to Ryan Floyd, a partner in Storm Ventures, who invested in Kidaro in 2005:

Thinstall is more geared toward application virtualization than providing access to the entire desktop, as Kidaro seeks to do. Rather than providing virtualization on the server side, as Citrix Systems Inc. [CTXS] does, Kidaro hosts its software on the client PC or notebook

This acquisition is yet another endorsement to Israel’s high tech industry. Israeli companies are being bought right and left these days, which is a testiment of the Israel’s ability to produce innovative companies that can make successful mid-size exits, without burining too much capital. In the future, I hope to see large scale exits, such as yesterday’s acquistion of Bebo by AOL.

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Eze Vidra

Head of Google for Entrepreneurs Europe and Campus London at Google
Eze is the Head of Google for Entrepreneurs Europe and Campus London. In 2005, he started VC Cafe to shine a spotlight on startups and Venture Capital in Israel, and in 2012, Eze founded Techbikers, a non-for-profit that supports education through cycling challenges for techies.
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