Received in my in box this article from RED HERRING.

PC Killer?

Desktone snares $17M, vies to convert big companies to virtual desktops.
July 30, 2007

By Ken Schachter

Desktone, which aims to get companies to junk their PCs in favor of thin clients with virtualized desktops, has landed $17 million in a series A funding round announced Monday.

Highland Capital Partners and Softbank Capital led the round, which also included China-based Tangee International and strategic investor Citrix Systems.

Desktone, whose software is designed to tie together client devices, operating systems, storage, applications, servers and network technology, is likely to face stiff competition. Some corporate IT departments prefer to build the virtualized desktop on their own. Startups like 2-year-old Kidaro, a New York City-based company backed by Genesis Partners, Storm Ventures and Opus Capital Ventures, also compete for a share of the market.

Microsoft, whose Windows operating system dominates the corporate workplace, in 2006 acquired Softricity, whose chief executive was Harry Ruda, now the chief executive of Desktone.

Peter Bell, a partner at Highland Capital and a Desktone board member, said Desktone, based in Chelmsford, Massachusetts, offers the IT managers of large corporations a respite from the complexities of managing thousands of networked PCs.

“Their software platform is removing some of the physical complexity where you might have thousands of desktops,” he said. Desktone will provide the IT organization a single management console.

Ron Fisher, also a board member at Desktone and managing partner at Softbank, the cost of maintaining a personal computer in a corporate environment can be several times the cost of acquisition.

“When you move people’s PCs, the cost of getting them set up is several hundred dollars,” he said.

Rather than charge companies one large fee for its software, Desktone is selling “software as a service,” charging companies a per-user fee per month or per year.

That model appeals to companies seeking to improve their return on assets, said Desktone Chief Operating Officer Paul Gaffney, who has served in senior positions at superstore chains Staples and Office Depot.

One-year-old Desktone already has some undisclosed corporate customers and intends to focus initially on financial services firms in the Boston-New York City corridor, Mr. Bell said.

Fort Lauderdale, Florida-based Citrix Systems’ infrastructure is used in some virtualized desktops to deliver software applications.

Though some companies will want desktop users to have “thin clients,” allowing the IT department to serve and store all information, others will be content to coordinate software patches and updates through a “virtual desktop” on PCs, Mr. Fisher said.

Until the next post,

Steve