Sales in the second quarter rolled up to $458 million, 16.5% improvement over the year-ago period. Product licenses grew by 15% while the smaller technical services segment raced to a 35% gain. Put it all together and you get non-GAAP earnings of $0.41 per share, up from $0.39 per share last year. The actual results were somewhat of a mixed bag, but optimistic comments from Citrix management propelled the stock forward.
Citrix is holding its own in key markets like desktop virtualization and cloud computing. That includes the company's Xen software being the platform upon which cloud computing market leader Amazon.com
Speaking from personal experience in the data center trenches, VMware
So if everything is so great for Citrix, what would I change if I had the power? Two things:
- You see the trend toward more support services and less license growth? Put the pedal to the metal on that -- lower license fees, invest in providing top-notch support services, and let it all happen. Sales will suffer at first but profits never will. International Business Machines
(NYSE: IBM)is one example of this virtuous cycle at work; another is Linux veteran Red Hat (NYSE: RHT). Citrix would do very well on this track.
- Speaking of Linux, you may have noticed that SUSE Linux vendor Novell
(Nasdaq: NOVL)put itself on the sales block. Citrix isn't rich enough to buy the whole thing, nor would it want to; but with more than $800 million of debt-free cash on hand, Citrix might be able to pick up the SUSE segment alone. Let Big Blue or some other giant with the resources to support legacy applications take Novell's aging Netware assets and so on, then run the other way with the much fresher Linux products.
With SUSE Linux and Xen virtual machines, Citrix would own an end-to-end solution, standing ready to profit from synergies and integration. Marry this to the service focus mentioned above, and Citrix could become a force to be reckoned with.
It would take some guts to change Citrix as we know it, but the end result would be so worth the trouble.
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