From NMBO
by Briefing.com
Citrix Systems (CTXS)
Citrix Systems enable thin-client computing. By providing a layer of software between servers and any kind of clients, the same application can be run from a server on any type of client. Microsoft endorsed the product in April 1998, pays royalties to use the technology in its multi-environment products, and provide endorsement through November 1999. Presentation made by Mark Templeton, CEO.
60% of cost of owing computer systems comes after purchase. Integration of multiple systems a major headache for corporations. Citrix market is reducing the integration costs by making existing multiple client environment work with network application servers.
Two main product lines: MetaFram, sits on top of Terminal Server (Microsoft product), and WinFrame, sits on top of Windows Server
Once basic product is sold, upsell opportunities include additional user licenses, load balancing product, security products, all from Citrix. Upsell products carry higher gross margins
Product pricing: MetaFram Server: $4,995 for 15 users, additional users $995. WinFrame server: $5,995 for 15 users, additional users: $995. Security add-on is $2,495 per server, Load balancer is $1,495 per server.
CFO presented business model overview: 98 97
Gross Margin 93 90
R&D 10 6
Sales & Marketing 30 29
General & Admin 8 9
Operating Income 45 46
Have deferred revenues on books of $98 million
Acquisitions in 98: VDOnet (7.9MM), APM (40.5MM), Insignia (17.5), EpiCON (8MM), DataPac, in 10/97 (5MM)
New production direction: "Application Dial Tone" concept is distributed ERP apps, where client user does not have to know server configuration for applications. To add a new client, just plug into network, with Citrix client side software installed, Citrix piece communicates with network to locate applications, client side simply makes request. Market is School Admin & Education (large campus possibilities, for example, all students plug their PCs in, get to use Word from app server without complexity of configuration) Also SME market Allows users to have widest possible choice of applications
Briefing.com commentary: Extremely well attended presentation. Institutional investors are no different from anyone else, the companies with great past performance in stock price draw the most attention. Nevertheless, Citrix 's greatest attribute, currently, is the Microsoft endorsement and royalty agreement. It makes buying Citrix almost like buying Microsoft, a strong plus. However, contract only runs through Nov. 99, bringing some risk of expiration. Operating margin of 45% is terrific, and does not include in-process R&D non-cash charges. This means it will not have to be restated if SEC changes rules on in-process R&D accounting, as is expected. Overall, a positive story. Montgomery projects revenue growth of 48% in 99, to $367 million, and EPS growth of 36%, to $2.25 a share.
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