Citrix Completes Zenprise Acquisition

Citrix Systems Inc. (CTXS - Analyst Report), a leading provider of virtualization, networking and cloud computing solutions has completed the acquisition of mobile security startup company Zenprise. Citrix previously signed a definitive agreement to acquire Zenprise on December 5, 2012 for an undisclosed amount.

Following the deal, Citrix will integrate Zenprise’s mobile device management solutions with its Cloud Gateway and Me@Work solutions for managing mobile applications and data. Users of this technology can get access to any application from any device allowing them the freedom to work remotely.

Zenprise mobile application provides additional security to the employees’ personal phones and devices from the hackers. It also segregates employees’ personal and professional data thereby reducing the chance of giving full access of personal information to their employers.

The mobile security market is really booming, based on the demand from large corporations to have mobile applications that will allow its employees to work from remote locations.

Zenprise, which is backed by venture capitalist and private equity firms, has a million plus users, and its customers include Monsanto, Boston Red Sox and Research In Motion Limited (RIMM). The new partnership could bring competition in the enterprise segment for the Blackberry maker, which is well known for providing secured mailing system for its customers.

The company foresees its 2013 top line to climb 14% year over year and its non-GAAP operating margin to improve 0.5% year over year mainly fuelled by strong demand of its popular cloud computing products like GoToMeeting, GoToMyPC, ShareFile and social networking site Podio. We believe that Zenprise acquisition will enable Citrix to develop a complete suite including GoToMeeting, Podio and ShareFile. The shareholders have responded positively following the acquisition as the stock has leaped 13.81%, since the date of the initial announcement of the deal.

Meanwhile, the ongoing macroeconomic uncertainty may act as a headwind for the company as it restricts several firms from their targeted IT spending. Additionally, high cost associated with virtualization may restrict the long-term prospect of Citrix. Finally, increased competition from VMware Inc. (VMW - Snapshot Report) provides certain downside risks for the company.

Considering these factors, we maintain our long-term Neutral recommendation on Citrix Systems. Currently, it holds a short-term Zacks # 3 rank (Hold).