Citrix Systems (CTXS)

Citrix is a dominant player in the virtualization market and holds a significant market share (over 90% considering that the presentation virtualization segment is a $1.3 billion market). Citrix is all set to be a fierce competitor in the desktop virtualization space, which is a $440 million market but expected to grow to $1.8 billion by 2012. One of Citrix's strengths is its ability to integrate its different virtualization products such as XenApp and XenDesktop. Its strategic partnership with Microsoft also puts it in a strong position to capitalize on the opportunities in the desktop virtualization segment, given Microsoft's dominance in the PC market. While Citrix is expected to be one of the leaders in the desktop and presentation virtualization segment, Vmware is expected to continue its dominance in the server virtualization market. An area of improvement for Citrix would be to add compatibility of its applications with non-Microsoft operating systems such as Macintosh and Linux. Analyzing the current and forecasted economic indicators, the industry data and the company's sales historical sales performance, a par value for the stock by the end of the third quarter of 2009 should be around $40. This valuation has been arrived at by using the FCFE valuation model.

References

Industry specific data retrived from - "Questioning the size of the server Virtualization Market Opportunity" - Credit Suisse (July 2008)

The new Citrix orchestration technology, known as Workflow Studio, is designed to tie together the company's application delivery solutions and integrate them with users' existing technology components.

Workflow Studio is built on Microsoft .NET, PowerShell and Windows Workflow Foundation technologies. This extensible design also makes it easier for customers to link Citrix products into broader systems management solutions from partners like HP (HPQ), IBM, and is designed to allow everything to function seamlessly within large enterprise environments.

While Citrix is using the Xen name for its individual products, it is positioning the entire stack — including its NetScaler web acceleration platform — as the Citrix Delivery Center. From that, it appears that Citrix is diluting XenSource’s core identity as a virtualization company in order to score points with Microsoft and catapult Microsoft’s forthcoming HyperV hypervisor as VMware’s chief rival.

Growth in the real time collaboration market has driven phenomenal growth in the Citrix Online segment, and the market appears to still be growing.

Citrix's acquisition of XenSource and Ardence allow it to integrate operating system virtualization and streaming; combined with application networking software, the new application set moves the company closer to being able to offer a fully virualized streaming desktop utility.

Xen is profoundly important to Citrix, is changing everything about the way that Citrix develops and delivers its products. Citrix is fully supportive of open source and the community, and you will see much more than just Xen as a core community focus from Citrix in the not too distant future.

The acquisition also sets the stage for Citrix to move boldly into the desktop as a service business, from the applications serving side of things. We’ve already seen the provider space for desktops as a service heat up with the recent arrival of venture-backed Desktone. One has to wonder whether Citrix will protect Windows by virtualizing the desktop competition, or threaten Windows by the reverse.

Citrix has been successfully pushing a subscription based licensing service, which brings in steadier revenues, increases customer retention, and cuts down on sales costs.