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Citrix leadership in flux, despite Workspace Services success

Citrix Workspace Services is on the rise, but more must be done to boost company revenues, including the sale of some well-liked technologies.

Citrix Systems' long-time president and CEO Mark Templeton plans to retire -- again -- and an outspoken investment...

firm snatched a seat on the board as the company works to streamline its portfolio and boost revenues.

Citrix declined to explain the timing of Templeton's retirement news this week, which comes amid the company's reorganization and mounting pressure to increase revenues. Templeton will stay on as long as it takes to find the best successor, with no deadline for an appointment, a spokesperson said. 

The timing is peculiar because in a recent interview, Templeton said he was excited to be part of the next wave of transformation and to deliver Citrix Workspace Services to support the software-defined workplace trend.

And that strategy has begun to pay off. In Q2, Workspace Services accounted for $406 million in revenue, up 3% from Q2 2014. (Citrix's net revenue was $797 million that quarter). Workspace Services also accounted for 10% of license revenue.

Workspace Services has caught on quicker than expected, said Mike Strohl, CEO of Entisys Solutions, Inc., a virtualization systems integrator and Citrix partner. In 2015, his sales of Citrix products are already three-times what they were all of last year combined, in large part because of Citrix Workspace license sales, he said.

The uptake is mainly from enterprise customers struggling to manage mobility. Citrix Workspace Suite allows IT to bundle mobility and desktops, which solves multiple problems, Strohl said.

"Without question, [Citrix Workspace Services] is the future," Strohl said. "It is in its infancy though, because customers with tens of thousands of users need [time] to strategize and implement it."

Another bright spot in Citrix's Q2 earnings came from ShareFile, up 44% in subscription revenue from Q2 2014. Citrix expects to maintain $3.22 billion – $3.25 billion revenue outlook for fiscal year 2015, with $780-$790 million in net revenue expected in Q3 2015.

Citrix's earnings weren't all rosy, however, and as the company moves to improve weak spots, executive changes are in order.

Out with the old

That change includes cooperation with Elliott Management Corp., a New York hedge fund that owns 7.5% of Citrix.

Elliott publicly chided the company in an open letter recently, listing suggestions to improve revenues. Among the most significant changes Elliott suggested include spinning off or selling the GoTo franchise and exploring the sale of NetScaler.

Elliott's activist investor Jesse Cohn will serve on Citrix's board of directors in place of Asiff Hirji, who has stepped down.

Citrix is also seeking an additional independent board member, mutually agreeable to Citrix and Elliott, to replace an unnamed current board member when appointed.

Citrix took some of Elliott's strategy suggestions seriously, and said during its Q2 2015 earnings call this week it will explore strategic alternatives for the GoTo family of products. Citrix is also in active discussions regarding a potential sale of its ByteMobile business, which has declined 50% since Q2 2014.

The internet and cloud segment of NetScaler's application delivery controller business has also declined 40% since Q2 2014, but was offset by an 8% increase in NetScaler enterprise business. Citrix claims significant sales involve NetScaler licenses –2,200 in Q2.

The company did not discuss any plans to sell NetScaler, as suggested by Elliott. If it did, Citrix customers and partners would be surprised.

"Customers are getting strategic with hosted desktops and NetScaler is a huge piece of that," Strohl said. "It's a large part of our business, and as our customers' use of Citrix VDI and cloud increases, we are seeing it sell."

Regards, Templeton

News of Templeton's plan to retire saddened many, but was no surprise.

"His return last year wasn't an eternal commitment. It was a matter of time," Strohl said. "This time it has a different look and feel, but it was going to happen regardless."

Templeton is seen as a technologist's CEO. He's led innovation and grown Citrix from a one-product company to a tech giant with over $3 billion in revenue. He made Citrix into a real powerhouse of desktop virtualization and network management, said Andi Mann, business technology strategist, Sageable LLC, an IT consultancy and analysis firm in Colorado.

Many Citrix users took to Twitter to give their regards to Templeton. Jo Harder, a cloud architect for a financial industry hosting provider and industry analyst for The Virtualization Practice, thanked him for being, "the ultimate geek."

Other leadership changes at Citrix recently include former senior vice president of worldwide sales and services Al Monserrat -- now CEO of RES Software -- and former senior vice president and general manager of Citrix's enterprise and service provider division Sudhakar Ramakrishna -- now CEO of Pulse Secure LLC. Citrix also lost two executives, Sumit Dhawan and Bob Schultz, to its chief end-user computing rival, VMware, last year.

While Templeton's record includes a number of enviable achievements, he has also overseen some questionable decisions, both strategic and tactical.

"No CEO guides a company flawlessly," Harder said. "There are always some bumps and bruises along the way, and that's especially true for high-tech companies."

Product naming changes, premium pricing and software bundling have confused customers and analysts, and the company's symbiotic relationship with Microsoft may have constrained Citrix from capitalizing on many new disruptive opportunities, Mann said.

"Citrix has proven unable to truly capitalize on megatrends that it should arguably be all over, including consumerization, cloud computing and enterprise mobility," Mann said. "It has been unable or unwilling to deal knockout blows to several competitors it should have dominated."

Acquisitions under Templeton have been hit or miss too, with the CEO's vision butting up against Citrix's ability to execute, Mann said. XenSource, Cloud.com, ByteMobile and ZenPrise, were all of questionable value. The Expertcity (GoTo) and NetScaler acquisitions were wins, Mann said, but weren't positioned as a strategic fit with Citrix's core products.

Overall, Citrix has done well under Templeton's leadership. But its 'legacy' has slowly caught up with Citrix, Mann said.

"It has seemingly been unable to keep ahead of the curve under Templeton's leadership in the last few years," Mann said. "While it will be sad to see him leave, and I have nothing but admiration and respect for him, it seems like this is the right decision for the future of Citrix, its products, its employees, its shareholders, and its customers."

Customers and partners expect Citrix's reorganization and streamlining efforts will right the ship.

"I trust that they know what they're doing and things will work out, even though there are a lot of question marks right now," Strohl said.

Bridget Botelho is senior news director of TechTarget's Data Center and Virtualization and End-User Computing media groups. Follow her on Twitter: @bridgetbotelho.

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Elliot is the same firm that bought a big piece of EMC and then started poking them about divesting it. http://itknowledgeexchange.techtarget.com/storage-disaster-recovery/investor-calls-for-emc-to-divest-itself-of-vmware/ Whatever they have in mind, it's not going to be business as usual.
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