Citrix Systems, Inc. (NASDAQ:CTXS) is one of the best-positioned companies to take advantage of the growing mobile trend, web collaboration, data sharing, and datacenter transformation. However, execution has been inconsistent as the company is in the midst of transitioning into a broader enterprises mobility, collaboration, and infrastructure provider.
Citrix is a cloud computing company that enables people to work and collaborate from anywhere, accessing enterprise apps and data on any of the latest devices, Citrix cloud computing solutions help IT and service providers build both private and public clouds, leveraging virtualization and networking technologies to deliver high-performance, elastic, and cost-effective services for mobile work styles.
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Citrix Desktop Solutions include XenDesktop, XenApp, App-DNA, VDI-in-a-Box, and XenClient. Citrix's Datacenter and Cloud Solutions include Cloud Networking and Cloud Platform products including NetScaler and CloudStack.
While the desktop pipeline remains at record levels (some of the deals showing up in backlog), deal slippage and end market confusion has caused a bit more uncertainty, according to BMO Capital Markets analyst Joel Fishbein, Jr.
In addition, the transitioning desktop business to more solutions-based sales around broader mobility (desktop/apps/mobile) could continue to hamper overall license growth near term.
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Fishbein is concerned that changes to the sales organization will take time to re-accelerate billings, which could pressure margins and cash flow as the company continues to invest.
Citrix is redefining its strategy around mobile as it has become a more significant "pain point" for customers versus desktops over the past few years. XenMobile comes in three editions covering devices, apps, and an umbrella edition that includes data sharing via SharePoint.
Citrix has invested for the long term. It acquired Zenprise in December 2012, and this has created a significant opportunity to expand just within its existing customer base. It recently bought Framehawk. The Framehawk solution, which optimizes the delivery of virtual desktops and applications to mobile devices, will be combined with HDX technology in the Citrix XenApp and XenDesktop products.
On the flip side, the recently announced Amazon WorkSpaces and the rise of desktops as a service (DaaS) could be a longer-term threat. Amazon Web Services began limited previews of Amazon WorkSpaces, which offers fully managed desktop services billed monthly, a challenge to traditional on-premises virtual desktop.
Amazon WorkSpaces is a cloud-based service, claiming to deliver desktops, applications, and data to multiple types of devices including Windows, Mac OS desktops, iPad, and Android, etc.
On the DaaS front, Citrix's Cloud Provider Pack 2 enables a simple approach to providing differentiated and vertical-specific Desktop-as-a-Service (DaaS) offerings delivered with Citrix XenApp and Citrix XenDesktop.
Meanwhile, new opportunities help underpin confidence in Citrix' longer-term growth. The Networking segment is being aided by continued desktop cross-sell, NetScaler SDX and increased total available market (TAM) opportunity in ByteMobile. Citrix has a new ADC partnership with Cisco Systems, Inc. (NASDAQ:CSCO), where NetScaler will be the preferred reference sell.
Fishbein noted that enterprise mobility management expands more aggressively into mobile, and the release of Project Avalon should help speed desktop deployments by enabling customers to deliver Windows as a cloud service. ShareFile is gaining traction and seeing growth north of 75 percent.
In addition, growth in long-term deferred revenue underlines Citrix's position within the enterprise. In the past quarter, deferred revenue grew 20 percent, significantly outpacing the growth in revenue. This was in large part driven by a 41 percent increase in long-term deferred revenue as more and more customers begin to realize the value of Citrix as a strategic vendor thus opting for longer-term contracts.
As pipelines remain strong, Fishbein expects this trend to continue for the foreseeable future. This should help drive free cash flow growth and increase visibility into future revenue.
As of the third quarter 2013, the company had $683.0 million in cash and current investments and $1.4 billion including long-term investments. Citrix is in the midst of a $500-million share repurchase program instituted in October of this year.
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