Citrix Builds Good Momentum for 2013

02/28/2013 7:45 am EST

Focus: STOCKS

Rob DeFrancesco

Founder, Tech-Stock Prospector

The virtual office company has made key moves and acquisitions that could see it gain as much as 30% this year, writes Rob DeFrancesco of Tech-Stock Prospector.

Earnings per share for Citrix Systems (CTXS), a provider of enterprise virtualization and networking solutions, of 90 cents in the December quarter beat the consensus estimate by 6 cents.

Revenue rose 19.5% (accelerating from 13.5% growth in the third quarter) to $740 million, well above the guidance range of $700 million to $710 million. Revenue growth in the Americas accelerated to 14%. There were 55 deals worth more than $1 million each, up 31% sequentially.

The desktop business (55% of total revenue) saw 240 transactions involving 1,000-plus seats, up from 153 in Q3, including 48 deals with 5,000-plus seats, a gain of 71% sequentially.

This unit scored 42 deals worth more than $1 million. Strong momentum in virtualization resulted in Citrix adding $100 million to deferred revenue from license updates and maintenance on desktop solutions.

The standout for Q4 was Citrix’s networking & cloud unit (21% of total revenue), thanks to the NetScaler ADC solution coming in with new license revenue growth of 38%. The strength can be tied back to the desktop, as NetScaler was attached on more than 700 Xen-Desktop deals, up from 540 deals in Q3. NetScaler VPX, the virtual edition, experienced growth of 79%, accounting for 8% of NetScaler license revenue.

A little over $20 million in revenue came from mobile carrier customers, with sales driven by the new Bytemobile unit, a provider of solutions that help mobile network operators manage and optimize data and video traffic.

The deal gave Citrix a key strategic position in the core infrastructure of more than 130 mobile operators in 60 countries. Bytemobile customers today serve more than 2 billion subscribers and process more than 20 petabytes of data traffic through their networks on a daily basis.

Mobile operators are experiencing massive growth in network traffic, driven by new consumer devices and rich multimedia content. Citrix is now able to offer these operators combined solutions to deliver a high-quality user experience to mobile subscribers, while helping operators manage mobile traffic with the best performance, visibility, and efficiency.

Also on the mobile front, Citrix in early January closed its $355 million acquisition of privately held Zenprise, a specialist in mobile device management (MDM).

With the BYOD (bring your own device) trend, there is increased risk that users will lose or leak sensitive corporate data through device loss or insecure cloud-based data services, so the need for mobile governance and security is critically important.

With various products on the market, organizations previously were forced to use a mix of solutions, often resulting in complicated deployments, high overhead, and a poor user experience. However, with Zenprise, Citrix offers the first solution for managing mobile devices, apps, and data from a single, integrated enterprise mobility product line. Zenprise this year is expected to contribute revenue of $30 million.

For 2013, Citrix sees EPS of $3.12 to $3.15 (the consensus was $3.14) on revenue of $2.95 billion to $2.98 billion, vs. the old consensus of $2.91 billion. If the tech sector stays strong, Citrix shares could potentially revisit their recent peak forward P/E of 30, which translates into roughly $94.

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