Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Bloomberg Customers

Citrix: No More One-Trick Pony?

Citrix Systems (CTXS), the Fort Lauderdale-based software company, could be a poster child for the technology boom and bust. The maker of networking software enjoyed a swift run-up in the late '90s, hitting a peak share price of $121 in February, 2000. Shortly thereafter, Citrix preannounced an unanticipated weak second quarter and watched its stock go into free fall, eventually plummeting 96%, to under $5 a share in July, 2002. Meanwhile, a game of musical chairs played out in the executive suite, as CEO Mark Templeton was first demoted, only to return to the post a year later.

Having survived the boom and bust, the challenge now facing Citrix is to have a successful third act. Many analysts are taking a wait-and-see approach. Often criticized for being a one-product company, Citrix has relied heavily on its flagship MetaFrame, which manages applications over a business' network from a central location and allows universal access on multiple platforms. Almost 90% of its $527.5 million in revenues in 2002 came from MetaFrame licensing fees.

"It is a very good product, and it holds significant market share in its niche," says Standard & Poor's equity analyst Scott Kessler. However, last year, Microsoft (MSFT) didn't renew a licensing contract -- which had accounted for more than 10% of Citrix revenues -- and some analysts have speculated that Gates & Co. would make a run at Citrix' market itself.

Not that Citrix isn't trying to diversify its revenue streams. This year, it rolled out products and features to refashion MetaFrame as a suite, bolstering its security services with Secure Access Manager, for instance.

That's an important tack, considering the success of security-oriented software companies such as Symantec (SYMC). Investors took to Templeton's growth strategy -- bidding the stock 53% higher since Jan. 1. However, it tumbled off a 52-week high on July 24, when Citrix warned that its third quarter would fall short of expectations. Shares closed at $18.67 on July 30.

On July 28, Templeton spoke with BusinessWeek Online Reporter Brian Hindo, about his growth plans for Citrix, his outlook for information-technology spending, and managing in rough times. Edited excerpts of their conversation follow:

Q: Has it been a challenge to manage the company through such roller-coaster times in the software industry -- especially given your departure and return as CEO?

A: I never left -- I lost my epaulets. Instead of president and CEO, I was president and senior executive officer. I still signed all the disclosures to the SEC, did all the conference calls, did all the road shows. But it was a time when there were questions about where we should go, and how we should get there, and what leadership was needed. When you're doing the responsible thing, and the board says we should consider different leadership, it's your obligation to say, "Yeah!"

In the software business -- whose core purpose is to produce intellectual property and value -- the No. 1 thing is clarity of purpose and how we're going to get there. That has worked well for us, especially in the last 18 months. Since I got my epaulets back, we've been totally focused on making clear the direction we want to go in. So far, so good.

Q: Some analysts have criticized Citrix as being a one-product company. How are you looking to diversify?

A: We have been a one-product company. We've articulated a new product strategy that we're betting the company on. Since then, we've released two more products, and one more is being released this quarter. They're all designed really well together as an integrated suite to provide secure, ubiquitous access. So, we're in proof mode right now.

Q: How do you see business spending on IT in the near term?

A: I'm not a believer that it's coming back in the way people might be hoping and wishing. Because of historical overspending, I think we have another three to four years of 3% to 4% growth, at maximum. There will be some strong sectors in the technology industry. And some stronger geographic areas -- for example, I have high expectations for Asia.

Q: Are you worried about increased competition for Secure Access Manager from software vendors specialized in security such as Symantec or Checkpoint (CKP)?

A: No. We're in a time where [some feel] security needs to be glued onto things. In our infrastructure, security is a characteristic. Symantec is offering virus-type security. Ours is fundamental access security.

Q: Your licensing deal with Microsoft expired last year and wasn't renewed. Your new agreement still gives you access to Windows source code, but it doesn't include financial considerations. Are you worried Microsoft will make a competitive move?

A: We've never seen Microsoft as a competitor. I think that's one of the myths around Citrix. I think we're probably the best example of a great Microsoft partnering story in software history. We leverage the Microsoft operating system and their platform, we drive their revenues -- because you need Microsoft licenses to use Citrix software. We're very much strategically aligned, because we depend on their operating system as the chassis, the core underpinning. The partnership is great -- it's better than ever!

Q: But some analysts have speculated that giants such as Microsoft and IBM (IBM) have the size, and possibly the wherewithal, to expand their services into your access-management niche.

A: You have to look at potential and propensity. On a potential basis, all it takes is money and smart guys, and Microsoft and IBM have money and smart guys. But on the propensity side -- that's really where it demands closer inspection.

Propensity has to do with what your end goal is. Microsoft's goal, and IBM's goal, is more purity around their particular infrastructure. The fact is, most customers will always have some mixture of all of those [large companies' products]. Our view is to continue our role as computing's Switzerland, allowing customers to use the best of breed from all of these vendors.

blog comments powered by Disqus