Citrix Strengthens Cloud Foothold

Citrix Systems Inc. ( CTXS - Analyst Report ) has become a formidable player and has solidified its foothold in the cloud computing businesses by taking the route of acquisition. Yesterday, the company announced that it has completed the acquisition of Cloud.com Inc., a leading developer for software infrastructure platform for cloud computing service providers. The financial terms of the deal are not yet disclosed.

The CloudStack product suite of Cloud.com offers an open-source platform-as-a-service environment that enables the cloud service providers to deploy and manage scalable applications in simplistic and cost-effective way.

Citrix is growing gradually as virtualization and cloud computing becomes essential for large enterprises to reduce costs when the economy begins to recover from the recession. Telecom service providers coupled with several other larger enterprises are at present relying more on third-party cloud infrastructure to offer and access cloud services easily and quickly. According to a research firm IDC, the cloud computing infrastructure market size is expected to cross $11 billion by the end of 2013.

With Cloud.com in its kitty, Citrix is now comfortably placed at par with cloud computing software leader VMware Inc. ( VMW - Snapshot Report ) . Incidentally, VMware is the closest competitor of Citrix. The company became a strong challenger for Amazon.com Inc’s ( AMZN - Analyst Report ) web services software and Microsoft Corp.’s ( MSFT - Analyst Report ) Windows Azure software. Cloud.com has a solid list of clientele including Tata Communications Ltd. ( TCL - Snapshot Report ) , KT Corp. ( KT - Snapshot Report ) , Apple Inc. ( AAPL - Analyst Report ) , Nokia Corp. ( NOK - Analyst Report ) , Zynga Inc., GoDaddy.Inc., to name a few.

Virtualization and cloud computing has become one of the most effective tool to reduce costs as enterprises expanded in size. Instead of installing their own virtualization and data center set up, the corporate bodies are now sharing cloud computing platform of dedicated providers like Citrix. As a consequence, the companies require the IT infrastructure to support this virtual office. We believe large and medium sized enterprises will increasingly move toward more dynamic and converged infrastructure.

We maintain our long-term Neutral recommendation on Citrix. Currently, it holds a short-term Zacks #3 Rank (Hold) on the stock.