Zacks Investment Research downgraded
Citrix Systems Inc.
), a leading provider of virtualization, networking and cloud
computing solutions in the U.S., by two notches to a Zacks Rank #3
(Hold) on Jul 12, 2014.
Why the Downgrade?
Despite gaining significant market traction in the highly
lucrative enterprise mobility segment and Windows app
virtualization through its two most popular products XenMobile and
XenApps solutions, the company continues to face stiff competition
). Notably, the acquisition of Desktone by VMware will enable the
company to offer DaaS through its Cloud Hybrid Service. Moreover,
Citrix's desktop platform faces competition from VMware's View
product and Oracle's broad virtualization stack. Furthermore, as
the company forays into different markets, it will be exposed to
foreign currency fluctuation risks.
Citrix provides software and equipment for streamlining business
computer systems. The demand for its products and services
significantly depends on the general demand for business-related
computer appliances and software. Fluctuations in the demand for
these products and services could have an adverse effect on the
company's business, results of operations and financial
The global economy is still suffering from fluctuation and has
not come out of the woods completely. Various geo-political
concerns in the European and African countries have limited the
momentum of economic recovery. This could make Citrix's near-term
financials volatile. Any adverse macroeconomic situation may result
in the slowdown of enterprise IT spending. Hence, the desktop
virtualization market may turn out to be less booming and Citrix
may lose its market share sooner than expected.
During the reported quarter, geographically, total net revenue
fell 4.4% from the past quarter. At present, Citrix is facing two
main problems, namely the continuation of global macroeconomic
headwinds limiting the momentum of new license sales and secondly,
the rising demand for tablets instead of PCs or notebooks. As per
Gartner Research firm, sale of Pcs is expected to decline in the
coming years and will lag behind tablet sales by the end of
For the current quarter, in the past 90 days, there has been
downward movement in the earnings estimates. Consequently, the
Zacks Consensus Estimate has moved down by 12.2% to 41 cents.
Other Stocks to Consider
Other stocks worth considering in this sector include
Aspen Technology, Inc.
). Both these stocks sport a Zacks Rank #1 (Strong Buy).
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