Title :Citrix Emerges As Gorilla In Server Software Jungle
Date :03/14/2000
Author :Rex Crum
Copyright :Investor?s Business Daily
Small companies speak of wanting to take on the 800-pound gorilla, the company that dominates an industry.
Bring 'em on, says Mark Templeton of Citrix Systems Inc. He's chief executive of a company that has rapidly grown to become the giant primate in the market for business application software that runs off servers in corporate networks.
The software and services provided by Citrix can be accessed over the Internet or private, Internet-like networks. Templeton says his Fort Lauderdale, Fla.-based company will be an even larger target as it builds its presence in the commercial, as opposed to the corporate, application service provider market. Templeton says most of Citrix's revenue has come from selling software and services used by companies that provide applications to their employees over a private, corporate network, a so-called corporate ASP. A commercial ASP is a company that makes its business from hosting applications for customers. A customer could be an e-commerce site that has the ASP host order-processing software. A corporate ASP hosts a site for access only within a company. "Our long-range goals include being a heavyweight in ASP infrastructure," Templeton said. "We're in a good position and a logical player here." That position has been strengthened by a surge in stock price. Citrix shares have been trading above 100, up from 13 a year ago.
The stock has been buoyed by the rise of the ASP market, shown in its fourth-quarter earnings statement. The company said revenue rose 56% from the year-ago quarter to $118 million. Per-share profit rose 41% to 34 cents from 24 cents. Investor's Business Daily gives the company an earnings- per-share rating of 98, putting it in the top 2% of publicly traded companies based on annual earnings growth in the last five years.
ASP Market Surging
"They've done a good job promoting the computer-based model of delivering applications," said David Friedlander, analyst with Giga Information Group. "Slowly but surely, what they're doing has to do with their position at the core of the ASP market."
Giga says companies that provide ASP services generated $360 million in revenue in 1999. Giga estimates that number will rise fivefold to $1.8 billion this year and then double to $3.6 billion in 2001. Among the leaders in the ASP space is Santa Clara, Calif.-based Pandesic LLC. Pandesic sells software and services for companies to set up e-commerce sites. The firm has more than 100 ASP clients.
It's the anticipated growth of the ASP market that analysts say makes sense for Citrix to expand beyond its traditional corporate clients. An example is a sale Citrix announced in January to London-based Psion PLC, a maker of mobile computing devices. Psion will use Citrix's technology so that Psion's workers can use the firm's hand-held computers to log into corporate servers. Psion officials say Citrix's products will let its mobile workers do things its other workers can do on PCs at the networked corporate offices.
Templeton says his company recently expanded its offerings to reach more customers and to better attack the ASP market.
Does More Than Windows
Citrix had sold products on only Microsoft Corp.'s Windows operating platform. Last month, though, it began its flagship MetaFrame software for servers running Sun Microsystems Inc.'s Solaris system.
And last month it paid $47.8 million for Innovex Group, a consulting group based in Miami Lakes, Fla. Company officials say the Innovex purchase will help Citrix give its customers more specialized computing products.
"Our type of business is in a heterogeneous world," Templeton said. "Most of our customers do not have purely Windows systems. They have been asking for Solaris and other solutions."
Analysts say Citrix believes in strength in numbers. The company lists 45 ASPs that use Citrix's server software to deliver applications. Citrix also formed an organization of companies that create and sell software that works with Citrix's products. The group's several hundred members include IBM Corp. and Apple Computer Inc.
"One of their strengths is that they've been aggressively taking on ASP partners," said Eric Klein, an analyst with the Boston-based Yankee Group. "They've had this vision for some time now about what the ASP market can be, and they've been guiding their product line that way."
Templeton says that while the ASP market is well-suited for Citrix, the company still faces challenges as it preaches the gospel of server-based computing. These include the fundamental hurdle of explaining this new type of computing. "When you go from a single product to multiple products, the complexity factor automatically goes up," Templeton said. Another challenge for Citrix is a biggie. Giga analyst Friedlander says Citrix will face more direct competition from Microsoft and its recently released Windows 2000 operating system, which he says offers server-based computing technology similar to Citrix's. "As Microsoft adds focus, Citrix needs to stay ahead and meet the needs of the ASP market," Friedlander said.
But Templeton says Citrix will remain unique enough to stay atop the ASP game. "I don't see Microsoft or Sun or anyone else stepping over to our sort of model," he said. "The challenges of doing so are enormous, but we're used to that."
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