By David Benoit And Lisa Beilfuss
Activist Elliott Management Corp. is moving in on software
company Citrix Systems Inc. and wants the company to slim down by
selling assets and cutting costs.
Elliott, a specialist when it comes to activism in technology
companies, sent a letter to Citrix management and board Thursday
introducing itself and laying out steps it believes the company
should take that could drive shares higher. Those include selling
or spinning off some of the businesses, culling product offerings,
buying back shares, cutting costs and sharpening the sales force to
boost profit margins that have stagnated.
The stock popped 7.1% to $70.66 in recent trading as Elliott
projected it could hit $90 to $100 a share by the end of next
year.
Representatives for the Fort Lauderdale, Fla., company weren't
immediately able to comment Thursday.
Citrix makes workplace software that allows employees to work
from their own desktops or mobile devices off of a centralized data
center, which is known as virtualization.
Elliott, which has a 7.1% stake, complimented Citrix on its
products, but is concerned the company has lost its focus with
various offerings such as mobile applications and cloud-computing
servers, as well as a host of other products Elliott says are
distractions. It said the company has failed to deliver on promises
to increase its focus, costing it credibility with investors and
Wall Street.
In January, Citrix announced a restructuring program by which it
would cut more than 700 jobs. At the time, the company said it
expected to save $90 million to $100 million.
For its most recent quarter, Citrix reported a 48% drop in
profit as it recorded restructuring-related charges. The company
also cut its outlook for the year and warned that current-quarter
results would disappoint.
While Elliott has often called for technology companies to be
put up for sale, the investor in this case isn't pushing for a sale
off the bat and is instead focused on turning around the
operations, a person familiar with the matter said.
In an unusual detail, Elliott in its letter to Citrix spelled
out the vast amount of resources it had tapped while researching
the company. It hired two investment banks, former technology
executives for advice, and consultants to work on how to
restructure the sales force, survey customers and review
products.
Such changes have long been speculated by Wall Street
analysts.
"In our opinion, it is a matter of when, not if, serious
operational changes will be made at Citrix," Stifel analysts wrote
in a note Thursday.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
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