QUOTE AND NEWS
Cloud Computing  Apr 3  Comment 
Citrix today announced the launch of GoToMeeting Free, a web-based communications platform that gives users quick and simple video sync-ups. With just one click, GoToMeeting Free is a fast way to instantly communicate, whether...
DailyFinance  Apr 2  Comment 
PROVIDENCE, RI -- (Marketwired) -- 04/02/14 -- GreenBytes®, Inc., a developer of full-featured desktop virtualization storage optimization software, today announced that its IO Offload Engine, a high performance storage appliance...
Forbes  Apr 1  Comment 
Today’s guest columnist is Citrix CIO and Vice-President of Operations Paul Martine.
DailyFinance  Mar 27  Comment 
Booth #1539 – Citrix today announced its lineup of speaking engagements at the 2014 Interop IT Expo and Conference. As a leader in solutions that seamlessly and securely unite apps, data and services on any device over ...
Cloud Computing  Mar 26  Comment 
Varrow, Inc., a leader in cloud, mobility, and security solutions, is pleased to announce that they have been promoted to Citrix Platinum Solution Advisor status. This achievement, which recognizes Varrow’s extremely high...
SeekingAlpha  Mar 24  Comment 
ByBottom Up Investing: The share price of Citrix Systems (CTXS) is starting to rebound, which is what I have been looking for the past few months. Investors were too worried about competitive pressure from AWS (AMZN) and VMware (VMW); my view is...
Cloud Computing  Mar 24  Comment 
Citrix today announced the availability of Podio for Nonprofits, a free program designed to help nonprofits organize the work they do everyday, improve work processes and ultimately be more effective. The global program...
TheStreet.com  Mar 13  Comment 
NEW YORK (TheStreet) -- The next stage of the cloud evolutionary process has already begun with a clear purpose being driven by a business landscape that's now putting as much emphasis on customized efficiencies as it is on low-cost enterprise...
Cloud Computing  Mar 13  Comment 
Manchester, UK - Worldwide thin client and cloud connection device manufacturer, VXL, unveils a new range of desktop devices for North America and Western Europe including two System-on-Chip (SoC) models, the Citrix ready, Xtona J12-z zero client...




 

Citrix Systems (NASDAQ: CTXS) is an enterprise infrastructure company specializing in centralization architecture and real time collaboration. The company provides a number of applications that allow companies to install single copies of software on a server and have employee computers access them through a network. Though it derives over 70% of its revenue from the slowly dying thin client market, where enterprise users stream applications from a central server to employee's PCs, the recent acquisitions of Ardence and XenSource have put the company in prime position to offer cutting-edge streaming virtualization technology, which allows enterprise customers to greatly cut IT costs by streaming multiple operating systems from a single machine or server simultaneously. Market growth in this area is phenomenal, but the company lacks solid application networking software, putting it at a severe disadvantage when compared to competitors like F5 Networks (FFIV) and Cisco.

Citrix also faces the prospect of intense competition with Microsoft. The latter has begun packaging competing technology into its new Windows Enterprise Server. Although though recent changes in the Vista license could benefit the Citrix by allowing its software to be the platform on which users can stream Vista, there is every possibility that users of Vista will take advantage of Vista's free centralization features to avoid purchasing Citrix's services.

Company Overview

Citrix is an enterprise infrastructure company that, with 99% of the Fortune 500 as customers, dominates its niche market of centralized access servers and software. Financially, the company has a solid set of numbers; revenue has increased 14% on average for the past five years, and operating margins have exceeded 20% for nine out of the last ten years. It should be noted, however, that the company recently announced a voluntary internal investigation and restatement of financial data due to its stock options granting practices.

Business and Financial Metrics

Second Quarter 2010 Results (ended June 30, 2010)[1]

In the second quarter of fiscal 2010, Citrix achieved revenue of $458 million, compared to $393 million in the second quarter of fiscal 2009, representing 17 percent revenue growth. Net income for the second quarter of fiscal 2010 was $48 million, or $0.25 per diluted share, compared to $43 million, or $0.23 per diluted share, for the second quarter of fiscal 2009. Net income for the second quarter of fiscal 2010 includes approximately $13 million in income tax expense, or approximately $0.07 per diluted share, for the settlement in principle the company reached with the Internal Revenue Service related to transfer pricing issues.

Software Licenses and License Updates

The products provided by Citrix allow companies to create and access a single, secure software database on a centralized server; companies save money because they only have to maintain a single software set. Employees access the applications and operating systems through the network, using "thin client" applications to enable streaming remote application use. The company also deals in application networking software, which allows improved performance for applications being used over a network. While over 70% of the company's revenue stems from thin client networking, the market for application networking software has more growth potential.

The company generates software revenues in two ways: through licensing and subscriptions.

  • When Licensing its software, Citrix sells the right to use its products for a certain period of time to its customers. In this business model, customers must pay extra in order to receive software updates and user support.
  • In its subscription model, Citrix customers pay a monthly fee to license the software; they also receive software upgrades and support for as long as they stay subscribed.

Business Segments

Citrix XenDesktop[2]

Citrix XenDesktop is an integrated desktop virtualization system that gives customers the flexibility to deliver the desktop as a service. XenDesktop is available in a range of packages designed for viral adoption and several market segments. The Express Edition of XenDesktop is offered as a free download from its Website. The XenDesktop VDI Edition is designed for virtual desktop projects that only require the hosted virtual machine method of desktop delivery. The Enterprise and Platinum Editions of XenDesktop include all the virtual desktop delivery models in one integrated package, and also include Citrix XenApp for delivering on-demand applications into virtual or physical desktops. All versions of XenDesktop include Citrix HDX technologies, when using multimedia, real-time collaboration, universal serial bus (USB) devices, and 3 dimensional (3D) graphics content.

HDX leverages the Citrix ICA protocol and adds Adaptive Orchestration. Each edition comes with user profile management and provisioning services to stream a single desktop image, on-demand, to multiple servers in the datacenter. All editions feature licensing for both Citrix XenServer and Microsoft Hyper-V virtualization infrastructure.

Citrix XenApp[2]

Citrix XenApp is an application virtualization solution that allows enterprise applications to be centralized and delivered as an on-demand service. XenApp delivers applications in two ways: hosted - by running application business logic on a central server using its HDX technologies to transmit the application’s user experience to the endpoint device, and streamed, by running the application locally. The XenApp server runs on Microsoft Windows Server 2008, Windows Server 2003 x64 Edition to Windows Server 2003, Windows 2000 Server and several versions of UNIX. During 2009, Citrix announced XenApp 5, offering planning, server provisioning and application management.

Citrix offers XenApp as a standalone product in different editions. The Platinum Edition includes the features and adds capabilities for application performance monitoring, secure sockets layers/virtual private network (SSL/VPN), SmartAccess control and single sign-on application security. The capabilities of XenApp are available in XenDesktop Enterprise and Platinum Editions to provide a desktop virtualization system.

Online Services[2]

Online Services provides virtualization at the desktop in the form of virtual meetings, Web-based desktop support, and remote access. These products are delivered using the software as a service (SaaS) method where customers simply subscribe to its cloud-based online services.

GoToMeeting is an online solution for online meetings sales demonstrations and collaborative gatherings. It allows a user with a personal computer (PC) or Macintosh (Mac) and an Internet browser to host, attend or participate in an online meeting or session without training. GoToMeeting is capable of providing a standard public switched telephone network (PSTN) conference dial-in number and voice over Internet protocol (VoIP). It features secure communication architecture that uses industry-standard secure sockets layers (SSL). Citrix also offers GoToMeeting Corporate, which supports multiple organizer accounts, unlimited meetings with up to 25 attendees, reporting, additional customization options and administrative capabilities. GoToMeeting Corporate also provides optional integrated toll-free audio.

GoToWebinar[2]

GoToWebinar is a do-it-yourself Webinar solution, allowing organizations to present online to geographically dispersed audiences. GoToWebinar allows users with a PC or Mac and an Internet browser to host, attend or participate in a Webinar session without training or IT support. GoToWebinar includes such features, as full-service registration with real-time reports, customized branding, automated e-mail templates, polling and survey capabilities, Webinar dashboard to monitor attendance and participation, presenter controls for changing presenters and VoIP and toll-based phone options. The service offers flat-fee pricing for unlimited Webinars of any length, for up to 1,000 attendees per Webinar.

GoToTraining[2]

GoToTraining is the online training tool that allows trainers to deliver content to multiple trainees, allowing organizations to expand their training program. GoToTraining allows users to host and participate in interactive online training sessions from either their PC or Mac. GoToTraining includes such features, as full-service registration with real-time reporting and management, online course catalog, automated reminder and follow-up e-mails, content library to organize and store reusable content, materials, tests, polls, and VoIP and toll-based phone options. The service offers flat-fee pricing for unlimited training sessions of any length, for up to 200 attendees per session.

GoToAssist[2]

GoToAssist is an online, remote technical-support solution that enables individual professionals and organizations of all sizes to provide on-demand support over the Internet. GoToAssist enables support staff to view and control the desktop of a user without the need to pre-install client software. There are two versions: GoToAssist Express and GoToAssist Corporate. They both work automatically and securely through virtually every firewall, even over dial-up connections, and they integrate into existing infrastructure.

GoToMyPC[2]

GoToMyPC is an online solution that provides remote access to PC and Mac from any Internet-connected computer. GoToMyPC, which sets up with a secure encrypted connection, enables individuals to use any resources hosted on their desktop, just like they were sitting in front of it. GoToMyPC Pro, tailored for the needs of professionals and small offices, supports up to 50 PCs, rolls out secure, remote access for multiple users, and features an administration Website in which managers can add, suspend and delete users and run usage reports. GoToMyPC Corporate is built for businesses that require detailed reporting, in-depth administration features, assign and manage remote-access privileges for employees with security features.

Datacenter and Cloud Solutions[2]

Citrix XenServe is an enterprise-class platform for managing server virtualization in the datacenter as a flexible aggregated pool of computing and storage resources. XenServer is offered free of charge to any user for unlimited production deployment. Citrix Essentials for XenServer and Hyper-V was announced in February 2009, and adds a set of advanced management and automation capabilities to the Citrix and Microsoft server virtualization platforms. This solution adds the capabilities to existing virtualization management systems, which include lab automation, availability, provisioning, workflow orchestration and seamless integration with storage systems.

Application Networking Products[2]

Application Networking Products include Citrix NetScaler, Citrix Access Gateway and Citrix Repeater. Citrix NetScaler is an all-in-one Web application delivery controller that makes applications run by application accelerator methods, such as hypertext transfer protocol (HTTP) compression and caching, ensuring application availability through advanced L4-7 load balancer and content switching methods, application security with an integrated application firewall and offloading servers for server consolidation.

Citrix Access Gateway is an SSL/VPN that delivers applications with policy-based SmartAccess control. Users have secure access to the applications and data. Organizations can extend access to datacenter resources from outside the office, while maintaining unprecedented control through SmartAccess policies.

Citrix Repeater solutions provide application delivery to branch office users in the enterprise branch by delivering local area network-like application performance over the area network (WAN). Appliance products in the Citrix Repeater family of solutions, including Citrix Branch Repeater (formerly WANScaler) and Citrix Branch Repeater with Windows Server accelerate applications to datacenters and mobile workers. The AutoOptimizer Engine, which serves as the cornerstone of the Citrix Repeater architecture, offers deployment options. The Citrix Repeater client software accelerates application delivery to other remote users, including those in smaller branch offices, home offices and business travelers, while users in larger branch offices are supported with Citrix Repeater appliances.

Technical Services[2]

The Company provides a portfolio of technical services to its business partners and customers to manage the quality of implementation, operation and support of the solutions. These services are available for additional fees paid on an annual or transactional basis. Consulting Services help ensure the implementation of the solutions. Citrix Consulting, a consulting services organization, provides both exploratory and fee-based consulting services. These services include on-site systems design and implementation services focused primarily at enterprise-level clients. Technical Support Services accommodate the ongoing support needs of customers. The technical support services are specifically designed to address the variety of challenges facing access infrastructure environments. It offers several support-level options, global coverage and personalized relationship management. Product Training and Certification teaches customers and partners how to optimally utilize the products and keep their organizations running.

Trends and Forces

Centralized Computing Growth Could Drive Citrix's Growth

Centralized computing, where a central server accessible to all networked computers holds data, applications, and even virtualized operating systems, has seen significant growth over the past few years. With an estimated 80% of a firm's IT budget spent maintaining operating system, application, and data infrastructure, the potential cost-cutting benefits of centralized computing are tremendous and are beginning to be recognized by major enterprise users. If the trend continues, Citrix will be well positioned to take advantage of the market's growth. With a dominant position in the stagnating thin client market and recent entry into application networking and virtualization markets, Citrix is known as a niche provider of powerful centralization software, though competitive pressure from Cisco and F5 Networks (FFIV) will probably reduce the company's potential customer base.

Citrix Moves Closer to the Ideal Virtual Desktop Utility

The Virtual Desktop Utility is the name for an idealized centralized virtualization suite allowing operating systems, applications, and data to be streamed to many computers from a single central server. Citrix's previous products all had some significant limitations to them: Streaming Server, the most important server necessary to achieve the VDU goal, requires a PC to have the Windows OS installed, while Desktop Server allows OS but not application virtualization. The Ardence software that allows operating systems to be streamed can be combined with Streaming Server and Desktop Server to move closer to achieving a VDU: with Desktop Server holding the operating systems for Streaming Server to move and Ardence facilitating the exchange and virtualizing the desktop applications, Citrix has taken its centralization capabilities to the next level, and has the potential to benefit from increased sales to efficiency-driven enterprise customers.

L4-L7 Switching Market Growth Could Drive Increasing Revenues

L4-L7 switching technology is a high-end infrastructure enabler that allows networks to do routing and switching based on the content of an application being streamed, rather than on the network addresses that are being used; this allows for more efficient load balancing. In layman's terms, the technology makes applications being streamed run with less network interference, thus allowing them to run faster and more efficiently.

Growth in the Real Time Collaboration (RTC) Market Could Help Drive Future Growth of Citrix Online

Face to face collaboration, while necessary in some cases, is extremely expensive for corporations. Travel and lodging costs paired with time constraints and limited productivity can make face to face meetings prohibitively expensive. Real time online collaboration, in which video and voice conferencing occurs over the internet, is a much more cost-effective option; the growth that Citrix has seen because of the increasing demand in this segment is a testament to this. Citrix is well positioned to over the next few years from a hot RTC market. Its triple-play technology enables faster connectivity and more and more managers realize the benefits of fully digital communication.

Competition

Citrix is not alone in the centralization market; companies like F5 Networks (FFIV), Riverbed Technology, Cisco, and, of course, Microsoft. As a newly formed virtualization enabler (through the XenSource acquisition), Citrix also faces heavy competition from industry leader VMware Inc. and, again, big bad Microsoft.

The Virtualization Market is Dominated by VMware

With over 50% of the virtualization market already in the palm of its hands, VMware's dominance of the market threatens to make Citrix's entrance costly. Microsoft's recent market entry and its planned release of total virtualization solutions could further limit Citrix's growth potential. Microsoft's ubiquity makes it very likely that enterprise users will use its solutions in the assumption that Microsoft servers and operating systems will work better with Microsoft virtualization software.

Cisco's Entry into the RTC Market Could Take Some of Citrix's Market Share

Cisco's recent announcement that it plans to acquire WEBX, a major competitor with Citrix Online, will bring major competition to the Real Time Collaboration market. Citrix offers a number of application-layer features that Cisco lacks, which could leave it with the advantage, but increased competition will probably lead to depressed pricing and lower profits. In the end, however, the fact that Cisco has decided to enter the market highlights its overall growth potential, even for Citrix.

The Windows Vista Effect Could Hurt Demand for Citrix Applications

The release of the enterprise server version of Microsoft's operating system, Windows Vista, poses a major threat to Citrix's current dominance of the centralized access market. With a number of new features preinstalled on the OS that offer the same functions as many of Citrix's products, competitive pressure on the company has increased, and will probably force the company to lower prices and, in doing so, depress profit margins. Furthermore, as the competing features are included with the most popular server OS on the market, fewer and fewer customers will have the incentive to go shopping for centralization software.

Changes in the Vista License Could Increase Centralized Infrastructure Revenues

Microsoft recently amended its Vista Enterprise user agreement to

  1. allow Vista to be used on diskless computers, essentially allowing the operating system to be streamed from a central server, and
  2. create a subscription service whereby Vista users can use the enterprise version of Windows on virtual machines that are loaded on a central server.

This amendment creates new opportunities for Citrix, as the previous acquisition of Ardence allowed the company to absorb technologies that let users stream entire operating systems from central servers running virtualization software. With the cost cutting capabilities of installing only a few Vistas on a central server system, corporations will have more incentive to purchase centralization technologies from Citrix.

Application Networking Growth May Leave Citrix Behind

With thin client technology being Citrix's current primary revenue earner, the company could have issues pulling in new customers. F5 Networks (FFIV) and Cisco are both known for providing application networking technologies that are easier to install and more reliable overall than Citrix's; a number of networking resellers surveyed by Morningstar Analysts stated that they would probably not push Citrix's application networking technologies over F5 Networks (FFIV) and Cisco's. With only 10% of the market compared to the competitor's combined 50%, it is unlikely that growth in this area will be as high as competitors

References

  1. Citrix Reports Second Quarter Financial Results
  2. 2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 Reuters: Citrix
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