Article explaining the irrational drop in CTXS.
I just received this "Personalized Email" from WSJ about CTXS. Forgive me if this old news.
If the drop is irrational will the recovery be equally irrational and complete or will the volatility scare people away?
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Citrix Dn 12%; Analyst Says Post-Split Microsoft Feared
Dow Jones Newswires
By Tom Locke
DENVER -- Shares of Citrix Systems Inc. (CTXS) were down more than 12% recently, and one analyst said he thought the drop was due to unfounded fears that the breakup of Microsoft Corp. (MSFT) would mean more competition for Citrix.
U.S. District Judge Thomas Penfield Jackson ruled Wednesday in the Microsoft antitrust case that Microsoft should be split and that its business practices should be restricted.
A.G. Edwards & Sons Inc. technology analyst John Puricelli said he thought the selling of Citrix stock Thursday was tied to a belief that a split Microsoft would provide even more competition for Citrix, a Fort Lauderdale, Fla., provider of software for server-based computing.
"I don't think that would be a good reason, but that's the reason most people would give if you could talk to the sellers,"' Puricelli said.
Citrix has an "absolutely dominant share" in its market, but Microsoft is already a competitor, Puricelli said, and he thinks the restrictions proposed by Judge Penfield would make it even tougher for Microsoft to compete. Microsoft "would have to go through a lot more hurdles to be competitive," he said.
Scott Kessler, an Internet equity analyst with Standard and Poor's, cited several possible reasons for the decline in Citrix shares Thursday. One is that Penfield's ruling could hurt Microsoft's dominant position and thus hurt the license royalties Citrix gets from Microsoft. Although Microsoft is a competitor, it also licenses Citrix software for its Window NT multi-user software. Citrix realized about $40 million of its $403 million in 1999 revenue from the Microsoft license royalties, Kessler said.
He said investors may also be worried Citrix might not exceed or even meet earnings expectations for its second quarter, he said. The First Call/Thomson Financial consensus estimate is 21 cents a share for the quarter. He noted concerns about a longer sales cycle tied to the company's strategy of targeting larger customers.
A Citrix spokesman couldn't be reached immediately for comment.
Citrix shares were recently down 8 1/16, or 13.5%, at 51 5/8 on volume of 13.5 million shares compared with average daily volume of 6 million shares.
Gerard Klauer Mattison analyst Michael Cristinziano said he thought the reason Citrix shares fell Thursday wasn't related to the Microsoft break-up ruling, but rather the failure of Citrix Chief Financial Officer John Cunningham to appear as scheduled Thursday at the PaineWebber 11th Annual Growth and Technology conference in New York. Another executive appeared instead, he said.
"People think that you're hiding sometimes," when there's a failure to show, he said. "I think that's got a lot more to do with the decline in the stock."
S&P analyst Kessler said he had also heard that the Citrix chief financial officer had failed to appear, and he thought that might be another reason for the share decline.
Kessler noted that Citrix has indicated it is employing a more enterprise-oriented sales strategy - targeting bigger contracts and bigger customers. But that requires larger sales cycles, he said, which means higher numbers for the accounts receivable collection measurement called "days sales outstanding," or DSO.
Investing in that big-customer strategy already affected profit margins in the first quarter and may be a factor in causing concern about second-quarter results, Kessler said.
Excluding amortization of intangible assets, Citrix reported first-quarter earnings of 21 cents a share, compared with 15 cents a year ago. The 21 cents was also two cents a share better than the First Call consensus estimate of 19 cents for the first quarter. Citrix posted first-quarter net revenue of $127.5 million, 50% higher than a year ago.
Citrix had a "good March quarter," Puricelli said, and the first-quarter increase in DSO isn't a big issue. "If you peel back the onion, it's perfectly explainable," he added.
Puricelli noted that A.G. Edwards has a strong buy on the stock and a 12-month target price of 130.
Citrix shares have dropped in value by more than half since reaching a 52-week high of 122 5/16 on March 7, but Puricelli attributed the drop to "market correction" rather than anything specific to the company.
While both Puricelli and Kessler think Penfield's ruling on Microsoft Wednesday had a negative effect on Citrix shares Thursday, neither is supporting the view that a Microsoft split will indeed occur.
"Our investment premise on Microsoft is predicated on our belief that they will win on appeal," Puricelli said. A.G. Edwards has a buy rating on Microsoft, and that's based on the assumption of no split, he added.
Kessler also thinks Microsoft won't be divided. "I strongly believe that the company will not be broken up," he said.
-By Tom Locke, Dow Jones Newswires; 303-293-9294 |
