Another Angle on 1997 Citrix/Microsoft

Found this while looking for other things on the net. It’s an article from the South Florida “The Business Journal”.

The article was intended to highlight Citrix’s commitment to South Florida but also managed to capture elements of the dilemma between Citrix and Micosoft in early 1997.

Citrix rebounds — after a close call with Bill Gates
South Florida Business Journal – June 20, 1997 by Jim Freer
Talk about dodging a bullet, Bill Gates-style. After strengthening its ties with Microsoft Corp., Citrix Systems Inc. is preparing for significant expansion, including an overseas push and possibly doubling its 190 employee-work force.

“The biggest and most important software company in the world has endorsed our technology as the way to deploy Windows-based applications,” said Roger Roberts, Citrix president and CEO.

On May 12, Microsoft agreed to include Citrix’s software technology in new versions of its Windows NT servers, which enable computer users to share one server for business software. Citrix software allows businesses to use Windows on computers and networks not designed for that technology.

Under the 2.5-year agreement, Citrix received an initial $75 million fee. It will get as much as $100 million in royalties tied to sales of Microsoft products that use Citrix technology.

Nearly gobbled by Gates
The endorsement ended three months of concern among investors and industry officials. They feared Microsoft might reduce its business with Citrix, undoubtedly curbing Citrix’s fast growth.

Microsoft owns 6 percent of Citrix, which develops its software under license and strategic agreement with Microsoft. With those links, Citrix has rapidly added clients that need to adapt older computers to Windows. In 1996, Citrix revenues tripled to $44.5 million, and its net income grew 10-fold to $18.7 million.

But last February, Microsoft told Citrix it was prepared to develop its own versions of Citrix’s software if the companies could not reach a joint development agreement.

That led to a sell-off in Citrix stock (CTXS-NASD). After reaching $50.75 on Jan. 22, Citrix hit a low of $10.63 on Feb. 27. Citrix rose from $19.25 to $32.63 on May 12, and was trading in the $35 to $40 range early this month.

Meanwhile, Citrix added another major distributor for its products, and several new clients are ready to come on board, Roberts said.

Chris Galvin, senior technology analyst at Hambrecht & Quist in San Francisco, last month issued a “strong buy” recommendation on Citrix. “If someone want to go to Windows NT, they also will be going to Citrix,” Galvin said.

Galvin said last month’s agreement makes Citrix software “the de facto standard” for bringing Windows to computers not designed for that technology. But he isn’t ruling out the prospect of Microsoft developing its own version after the Citrix arrangement expires.

Strong cash position
Citrix does not make public revenue and earnings projections. But Galvin anticipates that Citrix will post revenues of $94.5 million and net income of $32.4 million this year, growing to $170 million and $46.1 million in 1998.

Citrix has assets of $163 million and no debt. Galvin said that situation could lead to acquisitions of companies with complementary technologies.

Citrix was founded in 1989 by former IBM executive Edward Iacobucci. During 11 years at IBM, he was responsible for design and architecture of operating systems for the IBM Personal Computer Division in Boca Raton.

Roberts, a former strategic product management official at Texas Instruments, joined Citrix in 1990 and raised $15 million from three venture capital firms, along with equity investments from Microsoft and Intel.

Citrix has built its operations around WinFrame, its client-server software. Citrix customers include FPL Corp., GE Capital, Chevron, Citicorp, AT&T, Bristol-Myers Squibb and the U.S. Army Corps of Engineers.

About 160 of Citrix’s employees work at the Cypress Creek area headquarters. A dozen employees are in offices in eight U.S. cities, along with about a dozen others in international offices.

Citrix has subsidiaries in the United Kingdom, France and Germany, employees stationed in Canada and an employee who travels around South America. It also plans operations in Australia and the Asia-Pacific region, Roberts said.

“At our annual meeting in May, I said we could be twice our size within a year,” he said.

Roberts added that many new hires would be in South Florida.

“We look forward to continuing to thrive in the South Florida community,” Roberts said. “I would encourage any efforts to market the region as a high-tech beachhead.”