Citrix Down to Hold on Weak PC Sales and Stiff Competition - Analyst Blog

By Zacks Equity Research,

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Zacks Investment Research downgraded Citrix Systems Inc. ( CTXS ), 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 from VMware, Inc. ( VMW ). 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 condition.

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 2015.

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. ( AZPN ) and Autodesk, Inc. ( ADSK ). Both these stocks sport a Zacks Rank #1 (Strong Buy).

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VMWARE INC-A (VMW): Free Stock Analysis Report

CITRIX SYS INC (CTXS): Free Stock Analysis Report

AUTODESK INC (ADSK): Free Stock Analysis Report

ASPEN TECH INC (AZPN): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: VMW , CTXS , ADSK , AZPN

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