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Citrix-as-a-service plan bore fruit in Q1

Virtual Skype turns out to be a reason to pick up the phone

Citrix has posted a solid first quarter in which it posted modest revenue and profit gains, beat its expected earnings-per-share and said its transition to selling cloudy subscriptions is coming along nicely.

The headline numbers first: net revenue rose one per cent compared to 2016's first quarter, reaching “nearly US$663 million”; non-GAAP earnings per share hit $0.97, a little more than analysts expected; net income was $70 million, down from last year's $73 million.

Also down was product and licence revenue, which dropped five points. Balancing that was a 24 per cent increase in software-as-a-service revenue, a number that saw CEO Kirill Tatarinov declare the quarter “a significant quarter in our transformation” to becoming a cloud company.

The CEO was also keen to point out that for the "first time in more than four years, our Workspace Services product bookings grew double digits.” The company says this line is growing faster than ever before, has cracked the million-user mark, hauled in $400m in Q1 alone and saw over 20 per cent of new customer sign up for subscriptions.

Tatarinov thinks there's more good news to come from the cloud as Citrix has just launched VDI on Azure and already has 175 customers. The CEO didn't mention the forthcoming XenApp Essentials that will run in Azure and replace Azure Remoteapp. Readers keen on a wager might wonder whether the product will emerge at the company's Synergy conference in late May.

Tatarinov said the company scored two wins with “major global financial institutions” thanks to its apparently unique ability to virtualize Skype for Business, which he suggested is a door-opener as organisations contemplate Windows 10 migrations.

The company's networking business behaved a bit like the workspace crew: total revenue of $193 million was solid, licences fell by nine per cent by cloud sales were up almost 100 per cent compared to Q4 2016. ShareFile, Citrix's Dropbox clone, also did well.

According to Tatarinov, sales are going well everywhere: the company's three territories – Americas, EMEA and Pacific – all beat their sales targets. That's a turnaround from past quarters in which teams outside the Americas haven't hit targets. Now Tatarinov thinks the rest of the year will see improved results from beyond the Americas as a cherry on top of decent growth.

COO and CFO David Henshall said the expected growth means some changes – he flagged an update on the company's “longer-term economic model as well as our plan for the revenue model at our Analyst Meeting at the end of May.” Nothing to be afraid of there – just an update on how the company plans to handle the different cash flow patterns that come with subscriptions.

The CEO's message to analysts was very much that the company remains in transition to a cloudier, subscription-drive future that remains a work in progress. To prove it's working, much was made of an 11 per cent increase in deferred revenue, which now stands at US$1.7bn.

One topic Tatarinov did not address was the rumour that Citrix might be for sale. The CEO gave interviews in recent days during which he neither confirmed nor denied such ideas, saying only the company is getting on with business. ®

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