The dedicated servers at OVH come with their own custom kernel. The kernel is compiled without support for modules, so virtualization solutions like KVM / libvirt / Xen will show error messages and refuse to work.

The solution is easy. Install the standard Ubuntu Server kernel:

apt-get install linux-image-server

Then change the boot order so that the operating system does not load the OVH kernel by default any more:

mv /etc/grub.d/06_OVHkernel /etc/grub.d/25_OVHkernel

Run the update-grub command for the changes to become effective:

update-grub

Restart the server to boot the new kernel:

shutdown -r now

If everything worked fine uname -r will show an output like 3.2.0-25-generic instead of 3.2.13-grsec-xxxx-grs-ipv6-64 and lsmod will show you a list of loaded modules instead of an error message.