Data center software maker Novell Inc. said Monday, Feb. 25, it would acquire PlateSpin Ltd., a maker of server virtualization software, for $205 million in cash.

Founded in 2003, Toronto-based PlateSpin develops software that redistributes computing resources in data centers. The company was backed by venture investors including Insight Venture Partners of New York, which led its $7 million second round in November 2005, and Toronto-area investors Covington Capital Corp., Castle Hill Ventures, Skylon Capital Corp. and Four Quarters, which provided $3.5 million in earlier funding.

At the time of the second round, PlateSpin founding CEO Stephen Pollack declined to specify the company's valuation but said it was above $20 million post-money, and had increased sixfold between its first and second rounds.

Novell's deal for PlateSpin is expected to close during its second fiscal quarter of 2008. The company had $1.1 billion in cash and equivalents on its balance sheet at the end of October 2007, according to regulatory filings.

The virtualization sector has seen several large deals over the past few years. Storage giant EMC Corp. of Hopkinton, Mass., paid $635 million for VMware Inc. of Palo Alto, Calif., in 2004, then spun the company out in a $1.1 billion initial public offering last August. The same month, Citrix Systems Inc. of Fort Lauderdale, Fla., bought virtual infrastructure software maker XenSource Inc. for $500 million in cash and stock. F5 Networks Inc. paid $210 million to acquire Acopia Networks Inc. last year as well.

While exits have been brisk, venture investment also continues to flow into the virtualization sector. NComputing of Redwood City, Calif., raised $28 million from investors including Menlo Ventures and Scale Venture Partners in its second round of funding last month.

Others receiving venture investment in the past several months include Xsigo Systems Inc. of Sunnyvale, Calif., and OnStor Inc. of Campbell, Calif.

Brad Raymond, Cole Bader and Mark Baillie of Thomas Weisel Partners LLC was PlateSpin's financial adviser, while J.P. Morgan advised Novell. Shares in Novell traded up 15 cents, or 2.3%, to $6.76 on Monday.