Citrix Investor Rips Companys Performance, ‘Sub-Scale’ Partners

By Edward Gately

A New York-based investment firm has come forward as one of Citrix’s largest shareholders and is demanding the company shape up and deliver a better return for its investors.

Elliott Management Corp., which holds 7.1 percent of Citrix’s stock, sent a letter to the company’s board of directors Thursday outlining issues it believes are holding back its stock price. The firm is requesting a meeting with the board within the next few weeks to “share our detailed thoughts about how to improve Citrix for the benefit of stockholders, employees and customers.”

“Citrix has great products in strong markets,” said Jesse Cohn, Elliott’s senior portfolio manager, who drafted the letter. “However, Citrix has struggled operationally and has consequently missed a profound value creation opportunity to capitalize on these products and markets. Despite Citrix’s strong products, the company’s stock price performance tells the story of deep underperformance across every relevant benchmark, including its closest peers, over every time period during the last six years.”

Citrix’s 52-week stock range is $56.47 to $72.89 per share. Elliott believes the company can achieve a stock price of $90-$100 per share by the end of 2016.

Citrix issued the following statement to Channel Partners in response to Elliott’s letter:

“Citrix has always maintained an ongoing dialogue with our shareholders, and we welcome their input. We will review Elliott’s suggestions and respond as we do with all shareholders who engage with us. The Citrix board and management team continually evaluate ideas to drive shareholder value and are committed to acting in the best interests of all our shareholders.”

The increase in stockholder value is achievable because Citrix has leading technology franchises in attractive markets, according to Elliott’s letter. In 2010 and 2014, Citrix promised to make changes to address operational and share price underperformance, however, “operating expenses have continued to outpace revenue growth, and both profit margins and profit dollars have declined over the last 12 months,” it said.

“It is perhaps because Citrix’s promises have uniformly been followed by increased costs and greater product breadth that the research community maintains a skeptical approach to Citrix and continues to call for organizational change,” it said.

Citrix’s relationship with its channel partners didn’t escape Elliott’s wrath. Calling the company’s sales and marketing efforts, “inefficient,” the letter calls the Citrix channel strategy

… “stretched across too many channel partners, with important channel-enablement resources being directed to sub-scale partners. [But] we are confident all of these issues are fixable through a full realignment to implement best practices in the areas of deal team composition, sales management span of control, channel management and compensation structure.”

Elliott says it has an operational plan developed through extensive research and with the help of a full team of operating partners with “proven experience turning around software companies.” The two driving principles of the plan are fundamental change and effective oversight.

The plan includes implementation of operational best practices, evaluation of high-value, non-core assets, capital allocation and improved senior-level management. Also critical is “a strong and capable board that oversees and holds management accountable,” according to the letter.

At last month’s Citrix Synergy in Orlando, Florida, the company demonstrated its new Workspace Cloud platform, its XenMobile enterprise mobility management service, and other new offerings. It also updated it channel program at the beginning of the year.

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