Citrix: Mature, but still changing
Company restructuring to remain competitive
Broward-born Citrix Systems is all grown up, and with that comes new problems.
A little over 25 years ago, Citrix was a startup launched by three people from IBM and other big tech companies. Citrix soon became the technology company to watch in South Florida.
Today, Citrix is a more mature company with $3 billion in annual revenues and more than 9,000 workers worldwide, including 1,700 in Broward County. And now it is going through a painful restructuring as it moves its traditional “work from anywhere” technologies further into the mobile and cloud-based world to remain competitive.
“Success today may not carry you fast enough,” said Bob Swindell, president of the Greater Fort Lauderdale Alliance, who has seen employment ups and downs at Fort Lauderdale-based Citrix, as well as other local tech employers including Motorola and Blackberry.
Earlier this year, Citrix’s changes resulted in 200 layoffs in Fort Lauderdale and a total of 900 worldwide. Last week, Citrix warned investors of an expected shortfall in its first-quarter results, with Chief Executive Mark Templeton saying Citrix “underestimated the impact caused by our restructuring” and other strategic decisions.
On Wednesday, Citrix was considering a spinoff of its online technologies, which include its well-known GoToMeeting product, according to a CRN, a technology news website.
Citrix spokeswoman Stacy St. Louis declined to comment about a potential spin-off. On the company’s outlook, she recommended tuning into Citrix’s earnings conference call on Wednesday.
While the company undergoes major changes, some analysts see the software company as vulnerable to activist investors — like those who have meddled with Palm Beach County neighbor Office Depot — or even a potential takeover. Vanguard, BlackRock, Invesco and ClearBridge Investments all have holdings of more than 5 percent, according to a proxy statement Citrix filed Friday.
“That is being bandied about,” said R.W. Baird analyst Steve Ashley. “But I disagree. Activists show up when a management team is lethargic. Citrix is doing a lot to change.”
One factor in the rumors was the purchase of business software maker Informatica Corp. by private equity firms, a defensive move after activist hedge fund Elliott Management disclosed its stake in the company.
Ashley thinks Citrix will come out of the restructuring stronger and more competitive. “The market has started to shift away from their core business and that has resulted in a challenge to grow that business and to remain a growth company,” he said.
Still, a spin-off of its online technologies would show “how aggressive management is in driving change at Citrix,” he said. As a stand-alone business, the GoToMeeting unit would be more highly valued, Ashley said.
Swindell said Citrix is important to South Florida’s technology hub because the company “validates you can have a technology company that grows and has people who work all over the world.” The company also is important to the entrepreneurial spirit that South Florida is trying to cultivate.
In 2013, Swindell worked on a $2 million state-and-local economic incentives package for Citrix, as it renovated its Fort Lauderdale campus with plans to add 200 jobs. Citrix hasn’t collected any of those incentives, which are performance-based.
Asked whether he pursued the incentives out of concern about Citrix’s staying in Fort Lauderdale, Swindell said: “You can’t take these companies for granted. We’ve got to make sure they feel valued.”
While technically based in Fort Lauderdale, Citrix maintains a West Coast headquarters in Santa Clara, Calif., and has offices worldwide.
St. Louis, the Citrix spokeswoman, said the company considers Fort Lauderdale and Santa Clara “dual headquarters. We have executive leadership in both offices, and Mark Templeton has homes on both coasts.”
The incentives deal was signed in April 2013, about six months before Templeton made a roller coaster of decisions that created uncertainty in the market.
Templeton announced plans that October to take personal leave. He returned to work in April 2014 but said he would retire the next year. By June, Templeton had decided not to retire after all.
After last week’s company of lower first-quarter profits, some analysts downgraded Citrix.
William Blair & Co. analysts said they had expected Citrix to better integrate its products for the last year. The analysts said with management changes and cost cuts, they’re concerned Citrix will lag competitors in innovation. Blair is particularly concerned about sales management changes, noting top sales leader Al Monserrat, who left Citrix in January and has become CEO of a Citrix partner, RES.
“We are concerned that this could create a disruption in the business over the next few quarters,” the research firm said in its latest report on Citrix.
Citrix’s competitive environment has become more challenging, with companies such as VMware and Amazon, catching up with Citrix in certain technologies, Blair & Co. said.
Morningstar analyst Norm Young said in his note following the firstquarter profit warning that Citrix “faces significant competitive threats in its attempts at expanding its portfolio of products and services.” That intense competition could result in lower growth and profitability.
But Ashley said Citrix is still better-positioned than its main competitor, Palo Alto-based VMware, which is delivering separate products for mobile and app virtualization.
Citrix “has a more comprehensive solution. ... It will give Citrix a critical differentiation in the market,” he said.