Citrix Deal Strategy Run by Former Analyst to Combat VMware

Sixteen years ago, as an equity analyst at Needham & Co., Mike Cristinziano was one of the first on Wall Street to recommend buying shares of Citrix Systems Inc., following the software maker’s initial public offering the previous year.

Some $13 billion in market value later, Cristinziano is today responsible for making sure investors stay bullish, reported on its Tech Deals Blog.

Following a career in research and investment banking, Cristinziano has spent the past nine years running strategic development at Citrix, orchestrating almost 40 acquisitions to convert a single-product company into a central player in cloud networking, virtualization and workplace collaboration. Citrix spent its early years focused on software that let users access their office programs from remote locations.

With the help of acquisitions such as, Kaviza and GoToMeeting creator Expertcity, Citrix shares have more than tripled since the end of 2003, compared with the 57 percent gain for the Nasdaq Composite Index through yesterday. Sales have increased at least 16 percent each of the past two years, and analysts project growth of 17 percent this year to $2.57 billion.

“Mike is this incredible unsung hero within the company,” said Jesse Lipson, founder of ShareFile, a cloud-based storage provider that Citrix purchased last year for over $50 million. “He’s a key secret to Citrix’s success.”

Citrix declined 4.1 percent to $71.57 at the close in New York, paring the gain for this year to 18 percent.

Closing Deals

Cristinziano, 47, operates out of his home in Raleigh, North Carolina, nearly 700 miles north of the company’s headquarters in Fort Lauderdale, Florida. He lives about triple that distance from Citrix’s Silicon Valley office in Santa Clara, where he sat down for an interview to discuss his deal-making machine. Cristinziano said he spends about a third of his time in transit, meeting with venture capitalists and bankers and attending startup events to understand where technology is headed and where Citrix needs to go.

His biggest challenges lie ahead. As Citrix grows into a large enterprise, smaller acquisitions no longer move the needle in terms of revenue, so Cristinziano and his seven-person team have to make sure the company is betting on the right people in the right markets at the right time.

To date, most of the deals have cost less than $100 million, and the most expensive was virtual networking provider XenSource, which fetched $500 million in 2007. The success of the XenSource deal is still in question. Since the acquisition, Citrix has struggled to gain market share from VMware Inc. in the virtualization market.

Finding Talent

Cristinziano also has to contend with an inflating startup market, where entrepreneurs can create Web and mobile companies faster and with less capital than ever before. That means Citrix is not only competing against bigger companies such as Microsoft Corp., Inc. and VMware, but also with hot venture-backed startups trying to lure top developers.

“We still have an entrepreneurial spirit,” said Cristinziano, acknowledging that big tech companies are notorious for driving founding teams away after acquisitions. “When you find the right people, you want to retain them.”

In addition to paying what both sides view as a fair price, Citrix typically implements a three-year earnout, so that the acquired team has to reach certain milestones in order to receive its maximum award, Cristinziano said. The company also often adds restricted stock and options to its packages, and rather than cashing out all unvested options, it sometimes asks management teams to commit to a three-year term before getting fully paid.

Growth Prospects

“We’re not in the business to screw people,” Cristinziano said. “We want to keep them past those three years.”

According to Cristinziano, the most appealing reason to stay on board is the company’s growth prospects. Citrix’s internal projection has it surpassing $5 billion in sales, Cristinziano said, or more than double its revenue in 2011, though it hasn’t said publicly how long that will take.

Cristinziano, who has a master’s degree in systems engineering from the University of Pennsylvania, offered an idea of what markets that Citrix would like to enter. One is mobile device and application management, where companies are building software to let businesses secure and manage all the smartphones and tablets being used on their network. He said there are about 30 players in that market vying for relevance. Another area he’s following closely is cloud management, or the development of software for monitoring and improving websites and apps.

“He seems to identify the right trends at an earlier point than his peers and goes after them aggressively,” said Paul Madera, a managing director at venture capital firm Meritech Capital Partners in Palo Alto, California.

Madera, whose firm has backed companies including Box Inc. and Cloudera Inc., has yet to do a deal with Cristinziano. But it’s not for lack of trying.

“He’s out there actively searching as opposed to sitting at his desk and waiting for the bankers to call,” Madera said. “He’s one of the smartest guys in the business.”

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