Citrix Upgraded to Outperform

We upgrade our recommendation on Citrix Systems Inc. (CTXS - Analyst Report) to Outperform backed by its excellent performance in first-quarter 2011. The company is growing gradually as virtualization and cloud computing becomes essential for large enterprises to reduce costs when the economy begins to recover from recession. As a leading provider of enterprise software with desktop virtualization at its core, Citrix will benefit from the increasing trend of globalization.

Management raised its financial forecast for full fiscal 2011. We believe the virtualization market will flourish in the near future with desktop virtualization as its central point. The company’s major products such as XenDesktop, NetScaler, and Online Collaboration are generating huge revenue. As enterprises throughout the world are rapidly moving into virtualized environment, Citrix is witnessing massive demand for either new licensing or system upgrade contract.

In the previous quarter, in the desktop virtualization segment, 8 of the 14 deals exceeding $1 million include XenDesktop licenses. More than 2,000 customers purchased XenDesktop solutions in the first quarter, of which 83 transactions were for more than 1,000 seats and 17 transactions were for more than 5,000 seats. We believe Citrix can also capitalize on the growing demand for mobile computing since its software enables customers to remotely log in to desktops.

Citrix Competes with VMware Inc. (VMW - Snapshot Report) and Red Hat Inc. (RHT - Snapshot Report). Citrix has a very healthy liquidity position. At the end of the first quarter of 2011, the company had above $1,638.8 million of cash and marketable securities. Balance sheet remains free of any debt obligations. Furthermore, the board of directors of Citrix has enhanced its share repurchase program by $500 million.