Friday, April 26, 2013

Citrix Systems 1Q13 Earnings Weak- Lower Q2 outlook, Sell off of full position

On April 24th Citrix Systems reported 1Q13 earnings after the market close. Despite revenue increasing 14% to $672.9MM vs. $589.5MM last year, Citrix missed Street estimates of $676.9MM mainly due to softening IT spending and increased operating costs. EPS was $.62 up 5% from a year ago, however, missed Street consensus of $.63 by $.01. In addition, EPS Guidance for 2Q13 was $.62 marginally lower than Street consensus of $.70 and FY13 EPS was slightly adjusted down 3 cents.

Shares took a tumble falling ~11% in after hours to $60.00 below my stop/loss of $61.22. While revenues from the American geos were solid throughout the quarter performance internationally on a regional level was impacted by different market forces, which resulted in delays closing identified opportunities. While technical integration with Cisco has improved, the next big milestone will be deeper integration on top of Cisco’s smart intelligent network platform to deliver a beautifully integrated application delivery network solution which was indicated as a “second half phenomenon.”

Management indicated that FY13 will be shaped more back ended as they start to ramp two new businesses around XenMobile and ByteMobile. We sold our full position in Citrix due to lack of a short-term catalyst in Q2 besides benefiting from missed engagements in Q1. The uneven environment in technology spending makes us remain on the sideline to view probable weakness in Q2. While our thesis for the mid-long term remains intact we will continue to monitor the stock for a more attractive entry point around the $54.00 level. Citrix participates in a broader segment of opportunities than it’s competitors and offers investors a great way to invest in two high-growth verticals, however, the short term headwinds have caused the stock to overact on the downside.

No comments: