Microsoft is set to expand its presence in the desktop virtualisation market with the acquisition of Calista Technologies.

Microsoft will also announce an expanded partnership with Citrix where both companies will jointly market their virtualisation services, although some argue that the acquisition brings Microsoft into sharper competition with Citrix. It also provides an added headache for market leader VMware.

Calista claims its technology "directly addresses the two major barriers to widespread virtual desktop adoption: the quality of the user experience and the cost per desktop." Its technology supports remote Windows and Linux desktops via RDP, the Citrix-developed, remote desktop protocol that's built into Windows mainly for the purpose of providing remote technical support.

The product, called CVD or Calista Virtual Desktop, is said to deploy a so-called virtual GPU, which boosts the performance of applications making heavy use of graphics and/or video, both of which have long been gating factors for those wishing to deploy remote desktop systems. The company claims "data accelerations of as much as 20x supporting a high quality standard business desktop usage, including rich media, at 1Mbit/s per user."

One analyst, Roger Kay, president of technology research firm Endpoint Technologies Associates, estimated the acquisition's price at below US$100 million.

Kay added that Microsoft might even be interested in acquiring Citrix. Microsoft and Citrix have a very longstanding partnership, which has seen Citrix make a tidy living out of providing terminal services to remote desktops over its own protocol, ICA. Were this to happen, the combination would present a huge competitor for VMware, although the US$6.4 billion market cap Citrix would be a big mouthful to swallow.

If it doesn't acquire Citrix, then Citrix could find itself a victim of the move, according to Serguei Beloussov, chairman and CEO of SWsoft. Beloussov said that Microsoft will then own all the pieces it needs to deliver a system close to that which Citrix Presentation Server and Xen - inherited when Citrix bought XenSource in August last year - currently provides.

"We welcome this," Beloussov said. "With this acquisition, it means you don't need Citrix", he said. " We see it as a response to the acquisition of XenSource by Citrix last year.

"It's also good for us as it brings Microsoft closer to the Citrix solution. However, I don't know what VMware's plans have - VMware might have competing technology in development."

The story leaked out on Forbes' website, even though it was embargoed until 22 January.