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Strategies & Market Trends : Roger's 1997 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Jeff Mills who wrote (5978)	10/21/1997 7:33:00 PM
From: Bill Wexler	Respond to of 9285

You know what's knid of interesting about Citrix. I was looking back over the price history and I noticed something unusual. The stock went into the toilet earlier this year (from the mid 50's to as low as 10), when they made an announcement regarding some possible competetive pressure from M$. They subsequently had a blowout April earnings report, but the stock actually went DOWN the following day (from 11 and change to 11). But now, we've got analysts saying to "close our eyes" to valuation and buy the stock at these levels.

To: Jeff Mills who wrote (5978)	10/21/1997 9:17:00 PM
From: david	Read Replies (2) \| Respond to of 9285

anybody comments on the following position ? short CTXS at 74 sold naked put of Nov75 at 6. i have 6pts upward protection(assume commission is small) which gives me 80 breakeven and any price below 75 (on option expiration day) would give me 74-(75-6)=5pts profits, not bad ! what do you think ? d.

To: Jeff Mills who wrote (5978)	10/21/1997 10:46:00 PM
From: Roger A. Babb	Respond to of 9285

Jeff, I will post some detailed analysis of the Citrix financials after I finish establishing my short position (I am hoping to short more at 80+ on Wed.) and after the 10q details are available. But I will say at this point that all is not as it seems. The big earnings blowout this q (and probably next q) is an artifact of accounting. Citrix received a one time payment in the second Q from MSFT of $75 million for the Winframe technology. Even though the money is in the bank (cash increased by $80 million second Q), they chose to recognize the revenue over time as quarterly earnings. In fact it was a one time asset sale. (Asset sales are worth a PE of 1, not 60). Now if you consider the asset sale as just a transfer of a software asset to cash and set it aside, then cash only increased by about 5 million in the second Q and actually declined in the 3rd Q. Not enough detail in the news release to tell (need 10q), but excluding the MSFT deal it is not clear that profits did increase in the 3rd Q. There is an old saying that applies to help us around accounting gimmicks "Just follow the cash, the truth is in there". And, excluding the MSFT asset sale, cash has declined slightly over the last six months, so where is all of this money that was earned? I expect to be called an idiot by the Citrix longs and that is OK. I hope they drive it to new highs and all make big profits. But all is not as it seems here and the analysts will sort it out some day and the market will give Citrix a PE based only on its "on-going" business. Given all of the cash and that Citrix will have some on-going business after the debut of the MSFT products, I value CTXS at about $35 currently. These are only my thoughts and everyone should do their own research and reach their own conclusions before investing. I am short CTXS. Roger

To: Jeff Mills who wrote (5978)	10/21/1997 11:34:00 PM
From: Roger A. Babb	Read Replies (2) \| Respond to of 9285

Jeff, a little more Citrix math. By comparing with last Q, you can see that the liability for the MSFT sale was written down by 9.75 million, meaning that the real revenues were only 25.2 million and the real earnings were only 3.3 million for on-going business. Based on a price of $77, note the following: market cap 2.3 billion PE based on 4 quarters like this quarter PE = 170 PS = 90 price to book ratio 10 Also note that earnings from on-going business actually declined. And until they finish "writing off" the artificial liability for the MSFT sale, they can make the earnings be whatever they want in a quarter. $48.1 million of the $75 million remains to be used for inflating earnings, that can fuel about 3 more quarters growth. But the market (and maybe their auditors) will eventually see through this smoke screen. Looks like a good short to me!! Roger

To: Jeff Mills who wrote (5978)	10/22/1997 2:32:00 AM
From: JPM	Read Replies (1) \| Respond to of 9285

"Notes: Investors are paying $22.60 in CTXS stock for every $1 they sell in product. That is insane. What makes their product so special? If I recall, the reason it sold off to around $14 was that MSFT was close to cutting them off? Today's run seems way overdone -- being long this one would scare me a little! Comments? Cheers, Jeff Mills" Jeff, I wholeheartedly agree... its definitely a good short, though it may continue to rise in the short term... do you know of any similarly priced issues? Jp