Folks!
I want to begin what might be my last post (no promise!) here with a huge thanks to the years-long enjoyment I've had with MikeM here and elsewhere as well as all the people I've come to know online more recently. It's been nothing short of sheer joy to participate in this thread.
Most important, I want to thank all of you for helping me grasp the essence of the product, its opportunities and its obstacles. Helping me appreciate the basics about this particular line of products is a daunting task on your part due to my shortcomings.
I don't know exactly when I'm going to sell all of my Citix stock but I hope a quick bounce even it's slight will give me ample reason. My reasons will be different from a lot of peoples' reasoning because of my frame of reference -- Gorilla Gaming.
I bought Citrix stock prior to the publication of Gorilla Game. Being an enabling technology whose adoption has not ramped up to tornado speed, Citrix is the only stock that does not meet Gaming criteria that remains in my portfolio. In that light, as disappointed as I am I'm not at all surprised at the bad news about the company's short-term fundamentals that became apparent to all of us today. Being a staunch Gorilla Gamer, I believe there is increased risk in owning stock in an enabling technology before the tornado forms and that risk came home today with the news of the slowed rate of growth. In essence, the reason I'm going to sell the stock is because the adoption of the product is going in the wrong direction -- not faster but slower. Because of the strict Gorilla Gaming criteria I use, the slowed rate of adoption of the product compels me to sell despite the capital gains tax I'll have to endure.
I bought about 60% of my shares in late 1997 and the other portion in early 1998. Assuming a stock price of $22.00, my average annual rate of return including commissions but not taxes is 27.93%. The average annual return of the Russell 2000, the S&P 500, and the NAZ since the date of my first purchase is 7.41%, 19.46%, and 40.75%, respectively. Despite the huge drop in the value of my Citrix shares in the past few months, I've enjoyed returns that stomped the Russell 2000 (which is important because it's made up of small-cap stocks which Citrix was at the time of purchase) and the S&P 500. I lost big-time to the NAZ but having a 28% average annual return is nothing to sneeze at even when losing to the NAZ.
Someone commented that the DSO and increased recievables were the red flag all of us should have paid attention to. I couldn't disagree more. We did pay attention to them but one does not toss a company because one quarter's stats of that sort turn for the worse. More important, DSO and recievables have absolutely nothing to do with decreased growth in revenue, which is the real reason the stock price fell. (I'm not going to discuss the issue of why it fell before today's news because I don't have an informed opinion.)
The decreased rate of growth is at least partially explained by the longer sales cycle of the large contracts the company is going after. Because of my experience with Remedy Corporation when they had the exact situation a couple of years ago, I strongly suggest that people continuing to hold the stock try to determine if the sales staff is up to the task of dealing with the highest officers of divisions and companies in the Fortune 100 and 500. If they're not, a sales staff of sufficient caliber to deal with the big boys will need to be recruited and that will take time. Lots of time.
I have no idea if there is any reason for concern about the sales staff, but there are only two explanations for an increase in the length of a sales cycle -- customers legitimately require more evaluation time and/or the sales staff isn't closing the deals as soon as they should.
I wish everyone the best of luck in their decisions about Citrix. If the product goes into tornado and if there is room in my portfolio at that time for the stock, I'll likely be a buyer again. But not until the tornado forms.
--Mike Buckley |
