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Clouds rain money for Citrix in Q1

Some of it spills out of the net income bucket

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Citrix Systems's acquisition strategy over the past decade has clearly paid off, with the company making yet another transformation and carving itself out niches in virtualization, network and application acceleration, and now cloudy infrastructure and now giving it a strong revenue stream.

In the first quarter ended March, Citrix had sales of $589.5m, up 20.1 per cent compared to the year ago period. Product and software license sales rose by 18.7 per cent, to $178.4m, and related license update and maintenance services was a pool of $264.5m. Software as a service product sales, anchored by its GoTo family of products for collaboration, puffed up by 21 per cent, to $120.7m, and professional services gushed by 32.8 per cent to $25.9m.

Spending was up on all fronts for the quarter as Citrix pushed sales and invests in new features for products and acquisitions, and net income actually fell by 6.9 per cent, to $68.3m.

Wall Street analysts didn't seem to be at all concerned with this during a conference call with Citrix CFO David Henshall and CEO Mark Templeton.

They, like Citrix management, had their eye on the full 2012 year and were more concerned that Citrix had raised its guidance for the year on both the profit and revenue fronts. Citrix now expects for sales to be between $2.53bn and $2.56bn, up a smidgen compared to the projections that the company made as 2011 came to a close; non-GAAP earnings are now pegged at between $2.75 and $2.79 per share, a nickel higher. The second quarter is expected to rebound, with sales of between $605m and $615m and non-GAAP EPS of 58 cents or 59 cents.

Henshall walked through the Citrix divisions, and said that the Desktop Solutions group accounted for $338m in revenues in the first quarter, up 17 per cent. Software license sales were up by the same amount as services for the desktop unit, which sells XenApp and XenDesktop application and desktop virtualization tools, among other things.

Henshall said that this part of Citrix had over 3,000 customer engagements in the quarter and close more than 100 XenDesktop virtual desktop infrastructure deals in the quarter with over 1,000 seats, with 26 of those deals having more than 5,000 seats. The company had 19 deals with its desktop virty products that had $1m or more in revenues each, and its wares are now being peddled by 1,600 cloud service providers who are offering desktop virtualization services.

The Data Center and Cloud unit, which sells the CloudStack cloud fabric, commercial support and add-ons for the XenServer server virtualization hypervisor, and NetScaler network acceleration appliances, had $100m in sales, up 28 per cent compared to the year-ago period.

Software license sales in the data center/cloud unit rose by 22 per cent, and NetScaler was up like crazy, with software license sales on the physical and virtual appliances up 46 per cent. In fact, 400 of the XenDesktop deals cited above had a NetScaler component. The NetScaler VPX virtual appliances, which you can run on your own x86 servers, had 600 new customers in the quarter. The high-end NetScaler SDX multi-tenant network acceleration appliances, which Citrix created specifically for service providers, had 20 per cent growth sequentially from Q4 and accounted for 20 per cent of NetScaler revenues, said Henshall.

On the SaaS front, sales were up by 21 per cent, to $120.7m, and within this, collaboration tools grew by 29 per cent and accounted for more than half of the SaaS sales in the quarter. Interestingly, Citrix is starting to get some traction with its SaaS tools outside of the North American market, and international sales rose by 50 per cent and accounted for 15 per cent of the SaaS revenue pie for the quarter.

Citrix exited the quarter with $983m in deferred revenues and $1.6bn in the bank.

All of this would make Citrix a very attractive takeover target if it were not for the fact that Citrix has a market capitalization of $13.8bn.

Apple, Google, Microsoft, or Cisco Systems could afford to buy Citrix, but it would be very hard to justify the multiple against revenues or profits that Wall Street seems to think Citrix should command even at the current market cap, much less after you add in the cash and some profit for the shareholders and the bankers. Citrix is too big to buy, and that is probably the best thing for Citrix customers because Citrix will just have to keep on keepin' on. ®

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