Citrix Systems Shares Hammered In Wake Of Q3 Profit Warning


Citrix Systems shares are getting hammered Thursday after the vendor warned investors that revenue and profit would both fall short of its earlier estimates.

For its fiscal third quarter ended Sept. 30, Citrix is now expecting revenue of $710 million to $712 million, compared to its guidance of $730 million to $740 million.

Citrix is also expecting third-quarter profit of 39 cents to 40 cents share, down from its guidance of 41 cents to 42 cents per share. Excluding items, Citrix expects third-quarter earnings of 68 to 69 cents per share, compared to guidance of 72 cents to 73 cents per share.

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"While we are disappointed that we fell short of our expectations this quarter, we remain confident in our strategy and markets," Citrix CEO and President Mark Templeton said in a statement,

Templeton didn't explain what caused the shortfall but said Citrix will provide more details in its third-quarter earnings call on Oct. 23. He did note that Citrix would continue focusing on cloud services and mobility.

Citrix has been branching out from desktop and server virtualization, and earlier this year refocused its go-to-market strategy around mobility. The warning could be a sign that this shift is not yielding results as quickly as expected.

XenMobile, which includes mobile device management technology from Citrix's Zenprise acquisition, is a "heavy, security-based solution" that requires a lot of sales training, one partner told CRN.

The partner said he doesn't think weak sales of Citrix's NetScaler cloud software, or any of its other go-to products, are to blame for the sales and profit warning. Instead, this is a matter of Citrix still getting up to speed on the ins and outs of selling XenMobile, he said.

"An air pocket is expected as Citrix ramps up their existing sales team to sell this," said the partner, who spoke on condition of anonymity because he's not authorized to speak publicly on company matters.

Wells Fargo Securities, in a research brief sent to clients Thursday, said the shortfall could've been caused by "some combination of weaker NetScaler, execution issues transitioning from desktop to mobile, and smaller deal sizes." It also suggested that MDM and app management products may not be selling well enough to compensate for "sluggish desktop performance."

The fact that Citrix beat expectations in its second quarter supports the notion of this as a blip on the radar. But while Citrix second-quarter revenue jumped 19 percent year over year, its profit dropped 30 percent during the quarter in GAAP terms, and 8 percent in non-GAAP terms.

Citrix shares, which had been nearly flat this year prior to Wednesday's warning, dropped nearly 12 percent to $58.77 in Thursday afternoon trading.

PUBLISHED OCT. 10, 2013