The drumbeat of IT industry layoffs goes on. Wednesday, Citrix Systems said it will cut its worldwide workforce by 10 percent after the supplier of application delivery infrastructure technology saw sales deals shrink or be delayed during the fourth quarter.
While Citrix reported generally solid sales and earnings results for the quarter ended Dec. 31, company executives said the cuts are necessary given the uncertain state of the global economy.
"We believe the economy is going to remain challenging for some time," said president and CEO Mark Templeton in a conference call with financial analysts Wednesday. "IT budgets for 2009 are in a state of flux" and spending plans are difficult to predict, he said.
Most of the employee cutbacks will be made in the current quarter across all Citrix operations, in all geographies and at all levels of the company, said CFO David Henshall in the conference call. Executives did not disclose the exact number of employees to be laid off. As of early 2008, the company had some 4,600 workers. The cuts will save the company approximately $50 million a year.
For its fourth quarter ended Dec. 31, Citrix reported sales of $415.7 million, up 4 percent from the same period in 2007, while net income declined more than 4 percent to $60.1 million. During the quarter, product license revenue fell 9 percent to $162.3 million, but revenue from license updates grew 13 percent, and revenue from online services increased 18 percent.
Sales of Citrix's XenApp application virtualization software were the most impacted in the fourth quarter, Henshall said. Sales of those products were down 3 percent to $276 million, and numerous contracts for the product were postponed or decreased in size. Citrix, however, reported healthy sales growth across its other product lines, including application networking software, server and desktop virtualization software and online services like GoToMeeting.
Templeton said the bleak economic outlook could even work in Citrix's favor as it forces CIOs to rethink IT system architectures and put more emphasis on virtualization, cloud computing and Software-as-a-Service technology -- all of which plays to Citrix's product strengths. He said cuts in travel budgets are boosting demand for the GoToMeeting Web conferencing service, for example.
For fiscal 2008, Citrix reported that sales increased 14 percent to $1.58 billion, while earnings for the year declined almost 17 percent to $178.3 million. Product license revenue increased 7 percent to $620.2 million for the year, while revenue from license updates grew 15 percent; revenue from online services surged 22 percent.
Given the uncertain state of the economy, Citrix did not provide detailed guidance for the current quarter and for 2009. The company said it expects revenue in the first quarter to be about 5 percent below that of one year ago, and it expects revenue for all of 2009 to be flat.