Welcome to the latest edition of the Virtualization Vendor Profile. Every once in a while I’ll talk with a smaller or lesser-known company, learn about their business, discuss some industry trends, and write up a recap.

At the beginning of my recent phone call with Stratus Technologies, I called the company a “fault-tolerant server vendor.” Roy Sanford, Stratus’ chief marketing officer, responded: “That’s kind of like calling Ford a ’steering wheel company.’”

That’s not the best analogy, because Ford isn’t famous for its steering wheels. Stratus, on the other hand, is best known for its “ultra high availability servers,” as even its website says. But the point Sanford was trying to make — that Stratus does more than just fault-tolerant servers — is true.

Last year, the 30-year-old company got into the fault-tolerant software game with its Avance product, which synchronizes two servers in real time. Avance, a bare-metal install that provides users with a full Citrix XenServer environment, targets organizations with limited IT expertise and fewer than 500 employees. Naturally, the big question there is, why XenServer and not VMware or Hyper-V?

“It clearly was the lower-cost solution and provided everything the smaller business would need,” Sanford said.

I also asked Sanford if Stratus got into software because, as we recently reported, fault-tolerant hardware hasn’t exactly set the virtualization market on fire. But he didn’t agree with that premise.

“Fault-tolerant hardware can catch on in the virtualization space,” he said. “We have actually seen an up-tick in the number of customers who are keenly interested in fault-tolerant hardware.”

Instead, Sanford said Stratus expanded into software to address new availability problems brought on by virtualization. In the past, he explained, one of the leading causes of downtime was the failure of individual hardware components, network cards and drivers. Those systems have become more and more reliable over the years, but downtime is still a major issue, now thanks to the complexities and interdependencies of virtual infrastructures. A software approach can help address those causes, Sanford said.

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Citrix profits increased by 47% in the fourth quarter of 2009, driving profits for the year up 7% compared to 2008.

Citrix attributed its record profits to an increased interest in desktop virtualization and the launch of XenDesktop 4. But its quarterly revenue grew by only 8% compared to Q4 in 2008, and revenue from product licenses and license renewals grew 4% and 6%, respectively.

The really big growth came from technical services and online services, which saw revenues increase by 18% and 20%, respectively.

Citrix’s press release did not mention XenServer at all. Skeptics would point to that as just another indicator that Citrix is giving up on XenServer. But the company has said all along that, by making XenServer free and open source, one of the goals is to drive more services business. Judging by these financial results, that strategy is working.

Citrix’s results come just days after VMware reported that its fourth-quarter profits fell by 49% — although VMware earnings for the quarter did beat Wall Street expectations by more than $50 million.

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Xen.org posted the Xen 4.0 Release Candidate this week, and the new hypervisor code should be finalized by the end of next month.

Xen 4.0 will feature fault tolerance and the Open Virtual Switch, among other new features. Open source virtualization expert Sander van Vugt said the Open Virtual Switch “will take networking in Xen to the next level.”

“I’m convinced that this release is going to be huge,” he wrote in an email.

The new release comes at a crucial point for Xen. Citrix, the company most closely associated with Xen, faces constant questions about its commitment to XenServer and the server virtualization market as a whole.

Meanwhile, as virtualization.info’s Alessandro Perilli points out, Oracle is looking to become a bigger player in virtualization. Its Oracle VM is also Xen-based, so Xen 4.0 could help its charge into the market. (But then again, so could the rumored Oracle-Citrix acquisition.)

Xen also has an emerging open source challenger on its in hands in KVM, which is built into the Linux kernel. Although van Vugt took the side of KVM in our recent Xen vs. KVM debate, he still predicts good things for the future of Xen.

“Currently, VMware clearly is the more complete virtualization solution,” he wrote in his email. “Releasing the Xen 4 hypervisor will put Xen completely back in the picture, not only for Citrix, but for all other players in the Xen area as well.”

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