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Citrix Systems Remains Neutral


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We reaffirm our long-term Neutral recommendation on Citrix Systems Inc. (CTXS - Analyst Report) as we believe the stock is currently fairly valued. The company reported mixed financial results for the third quarter of 2012. Though net income handily beat the Zacks Consensus Estimate, revenue fell below the same. At present, Citrix is facing two pronged problems like continuation of global macro-economic headwinds, which slows the momentum of new license sales and growing  demand of tablets instead of PCs or notebooks.

Citrix has provided a weak financial outlook for the ensuing fourth quarter. The stock price plummeted 26% in the last seven months. Nevertheless, we believeglobal trends toward virtualization and cloud computing will facilitate the company to report strong resultsin the long term. In our view, business fundamentals of Citrix remain intriguing as the global virtualization market will continue to flourish in the near future.

At present, Citrix is concentrating on three broad markets: Desktop virtualization, Web Collaboration & Cloud Computing, and Application Networking. As desktop virtualization has become the top priority for any IT set-up, Citrix is introducing newer innovative products that will facilitate business flexibility, security, and centralized management system. Citrix currently commands over 31.5% global market share for the cloud-based remote support services systems. VMware Inc. (VMW - Snapshot Report) is its closest competitor.

In third-quarter 2012, 42 deals exceeded $1 million including 47.6% of product mix for XenDesktop new licenses, in the desktop virtualization segment. XenDesktop, currently accounted for more than 54% of total product revenue. More than 3,000 new customers purchased XenDesktop solutions in the second quarter, of which 153 transactions were for more than 1,000 seats, and 28 transactions were for more than 5,000 seats.

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