Citrix for Sale Again? (Why This Time It’s Different)

You’ve heard the rumor every few years for nearly three decades: Citrix Systems is either up for sale or exploring a sale. Well, the rumor is back. But this time the circumstances are different for Citrix and the company’s software channel partners.

Once again, Citrix is working with advisors to determine whether to sell itself, Bloomberg reports. The latest chatter didn’t mention the roster of advisors. And there’s no guarantee that an actual company sale will occur, the report said.

Citrix Systems: Business History

For those new to the story: Citrix, founded in 1989, first gained fame for its multi-user technology and has grown to offer desktop virtualization, networking and various cloud technologies.

For long-time Citrix followers, we’ve all got a case of deja vu. Anyone who grew up with Microsoft Windows NT Server in the mid-1990s remembers the M&A rumors as Microsoft and Citrix partnered (and potentially competed) over multi-user technology license agreements. By the 2000’s, VMware was in the market blending virtualization and hosted desktop technologies, and pressuring Citrix’s business from time to time.

Despite some of that competitive turbulence and the repeated M&A rumors, Citrix somehow pressed forward as an independent company — and a pretty large one at that. Fast forward to the current year, and the company expects full year revenue for 2021 to be $3.22 billion to $3.25 billion, Citrix forecast in July 2021.

Citrix Systems: Transformation Challenges, Previous Asset Sales

On its own, that’s a substantial revenue number. The bad news? Wall Street analysts were expecting roughly $3.38 billion in annual revenue, Seeking Alpha reports.

Citrix CEO David J. Henshall

In a July 2021 letter to shareholders, Citrix CEO David Henshall tried to reassure investors that the company was making progress on a three-point company transformation strategy. The plan’s three primary goals:

  1. Build the most complete and integrated cloud-based Workspace platform to support customers deploying secure, distributed work;
  2. Migrate our installed base to Citrix Cloud services, making it easier for customers to adopt additional Workspace technologies – creating additional customer value while modernizing their IT infrastructure; and
  3. Transition new business bookings from on-premises licenses to SaaS subscriptions.

Still, some investors are growing impatient. A case in point: Activist hedge fund Elliott Management has amassed a more than $1 billion stake in Citrix and “wants the software company to take action to boost its lagging stock price,” The Wall Street Journal reported on September 7, 2021.

Here again, Citrix watchers have a case of deja vu. Elliott Management pressured Citrix in mid-2015 to make wholesale business changes. Elliott’s open letter from July 2015 said CloudBridge, CloudPlatform and ByteMobile “are non-core, are underperforming and are distractions to the management team,” Reuters reported. Amid that backdrop, Citrix ultimately sold off some assets in January 2016. And by July 2016, Citrix sold its GoToMeeting division to LogMeIn.

Citrix Systems: New Desktop Virtualization Challenges

Fast forward to present day. The public cloud services market continues to consolidate around Amazon Web Services, Microsoft Azure and Google Cloud Platform.

At first glance, there’s plenty of opportunity for Citrix to provide add-on software and services across those public cloud platforms. But take a closer look and you’ll see new types of competition emerging.

Concern number one involves Microsoft Windows 365, which allows partners and customers to stream Windows PC applications and contents “to any device,” the company asserts.

Windows 365 surfaced in mid-2021. Most folks are wondering why it took Microsoft so darn long to introduce the service. After all, numerous third-party software companies have attempted to set a Desktop as a Service (DaaS) standard over the past two decades. But Microsoft now has two big advantages in the market: Control of its own massive cloud, coupled with control of Windows. Put the two together, and you wonder how third-party ISVs will compete against Windows 365.

ServiceNow and Nerdio Support Microsoft Windows 365

Take a closer look, and you’ll notice both ServiceNow and Nerdio vowing support for Windows 365. Indeed:

  • ServiceNow plans to integrate with the Windows 365 cloud service. Joint customers will be able to request and receive Cloud PCs directly through Microsoft Teams. The integration leverages ServiceNow IT Service Management (ITSM) and Virtual Agent to integrate workflows through Microsoft Teams, ServiceNow says.
  • Meanwhile, Nerdio Manager for MSP and Nerdio Manager for Enterprise (formerly known as NerdioManager for Windows Virtual Desktop) are expanding to allow users to choose between Azure Virtual Desktop and Windows 365. With Nerdio’s publicly available cost estimator tool, users can determine which desktop virtualization model makes the most sense for their specific use case based on price and functionality, the company says. Nerdio’s Windows 365 support is particularly important for MSPs. Ahead of the Windows 365 announcement, Nerdio in some ways emerged as the go-to partner for MSPs that want to deploy, manage and monetize Windows virtual desktops.

Citrix has its own tools to help partners and customers optimize Microsoft 365 applications. But ultimately, Citrix may get squeezed directly by Windows 365, and indirectly by IT management tools that help corporate IT departments as well as MSPs embrace Microsoft’s own desktop as a service, ChannelE2E believes.

Citrix Systems: Potential Buyers?

Meanwhile, Citrix’s market capitalization now stands at $13.61 billion — a small number compared to giants like Microsoft ($2.25 trillion)… but a big number for many potential buyers to swallow.

So, who could potentially step up to acquire Citrix Systems? The obvious answer involves private equity companies — many of which are quite familiar with Citrix and its offspring. For instance, Francisco Partners and Evergreen Coast Capital now own LogMeIn — which had swallowed such Citrix brands as GoToConnect and GoToMeeting ahead of the September 2020 private equity deal.

Potential Citrix buyers could also include private equity firms Bain Capital and/or Thoma Bravo, though valuation is a hurdle, Bloomberg suggests.

Elsewhere, we wonder if enterprise technology provider Broadcom would acquire Citrix. After all, Broadcom has a habit of buying older software companies that are deeply entrenched in the enterprise and throw off a lot of cash. Examples include Broadcom buying Symantec’s enterprise security business for $10.7 billion in 2019, and CA Technologies for $18.9 billion in 2018.

We haven’t heard any specific rumors about Broadcom or private equity firms taking a look at Citrix. But if we had to guess, Citrix is quite serious about a potential company sale this time around.

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