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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Roger A. Babb who wrote (7355)	4/19/1998 8:22:00 PM
From: Lazlo Pierce	Read Replies (1) \| Respond to of 18691

Roger, came across this CTRX recommendation. Just passing it on. *******************************8 Citrix Systems Randall Williams-Gurian editor of Undervalued Stock Ideas, usistocks.com provides the following commentary. A 1 year subscription is $89. You may receive a FREE trial copy of his publication and details can be found at the above web site. His recommendations generated an average annualized return of 39%. He provides the following stock idea on Citrix Systems (CTXS 56). Below is his write up. "Citrix Systems was founded in 1989 and shipped its first products in 1991. The company, located in Fort Lauderdale, Florida (954) 267-3000, is the leading provider of system software for thin client/server computing, its flagship product being WinFrame thin-client/server system software. The company also licenses its ICA(Independent Computing Architecture) technology. The WinFrame product allows business critical applications to be centrally deployed across different computing environments, regardless of user location, type of network connection, type of client hardware or operating platform. ICA turns any client device (i.e. a personal computer) into the absolute thin client by sending keystrokes and mouse clicks from the client to the server executing the application on the server. In April of 1997, Citrix announced a license agreement with Microsoft Corporation. Microsoft agreed to pay Citrix a fee of up to $175 million over the next five years in exchange for the use of Citrix software in the next versions of Microsoft's NT operating software. More recently, Citrix announced significant licensing agreements with computer hardware companies including Hewlett Packard, Phillips and IBM, for its Independent Computing Architecture protocol(ICA). The license agreements grant the companies the right to embed Citrix's independent computing architecture protocol technology into a range of products, including embedded operating systems, Windows based terminals, medical equipment and wireless handheld devices. The alliance with Microsoft and other industry leaders positions Citrix for continued rapid growth Thin client computing is on the upswing and that is why Citrix is so enticing. Citrix founder and chairman Ed Iacobucci has a vision for thin client computing. Ed predicts that soon, the only equipment necessary for computing will be a key board, monitor and phone jack. Industry bell weather Microsoft agrees. Its decision to license Citrix software speaks volumes. However, the industry giant's relationship with Citrix has been rocky. In February of last year, Citrix stock dropped from the mid $40, to almost $10 a share when rumors surfaced that Microsoft was toying with the idea of developing its own multi-user functionality and adding that to its operating software. After a few tenuous months for Citrix shareholders, Microsoft decided to license Citrix software. After the announcement of the agreement with Microsoft, Citrix stock recovered most of its losses and now trades at levels well above those in January of last year. The alliance with Microsoft and other industry leaders positions Citrix for continued rapid growth. Citrix is the leader in its field and enjoys substantial operating strength. Citrix reported fiscal 1997 (year-end is December 31) revenues of $123.9 million, up an impressive 178% from the $44.5 million reported in fiscal 1996. Even more spectacular is its earnings. Citrix reported earnings of $1.52 a share in 1997, (adjusted for a pre-tax one charge of 8 cents from the purchase of in process research and development) versus 69 cents in 1996. Citrix reported gross margins of close to 90% and net margins of over 33%. This compares to margins in the 5-10% range for most technology companies. Citrix, being a software company, finds itself in the enviable position of translating more of its revenue growth directly into earnings. This bodes extremely well for the its stock price. Citrix also has a clean balance sheet with large amounts of cash, no long term debt and sports a current ratio of 21.0. Citrix trades at a premium to the market, which is understandable, given the prospects of its technology. The stock trades at 30 times fiscal 1997 earnings, but at only 22 times our fiscal 1998 earnings estimate of $2.10. CTXS is cheap relative to its expected growth rate, due to the tremendous market for its technology. If you are looking for a software company with a leading market position confirmed by its impressive list of licensees, buy CTXS at or below $48. We have a 1-2 year price target of $80 or 38 times our 1998 earnings estimate." Dave