Dell Acquisition Of Citrix Makes Sense For Partners, But Could Be Too Expensive

For partners, a Dell acquisition of cloud solutions developer Citrix makes a lot of sense, but analysts caution that the deal could simply be too expensive for Dell to pull off.

Stephen Monteros, vice president of business development and strategy at Ontario, Calif.-based Dell partner Sigmanet, said acquiring Citrix would make sense for Dell and Dell partners.

"Dell has [virtual desktop business] Wyse, and [Citrix] is a natural build-out for that," Monteros told CRN. "Desktop virtualization now is hot again. People are starting to get the message that it's about management savings overall. I think there's definitely opportunity to make money there. When there's consolidation, it's good for us in the channel, programs start to look more homogenous."

{Related: Michael Dell: Carl Icahn Is A 'Bad Guy'}

Citing unnamed sources, Reuters reported late Tuesday that Citrix is in a hurry to sell. Citrix is being targeted by activist investor Elliott Management, and wants to sell itself whole before selling off pieces of the business. Dell would not comment on the report Wednesday.

Still, buying Citrix in its entirety would be a big spend for Dell -- maybe too big, said Geoff Woollacott, an analyst with TBR Inc.

For example, when Dell bought Wyse in 2012, it reportedly paid $400 million to $600 million. TBR estimates Citrix's market capitalization at between $12 billion and $13 billion.

"That is really hitting the cookie jar more than I would think they would want to do unless their free cash flows are ramping up, and that's hard to discern, given they are private," Woollacott said in an email to CRN.

Citrix is in discussions with private equity investors as well as technology firms including Dell to acquire the company, Reuters reported.

Dell is no stranger to this scenario. The Round Rock, Texas, company was under pressure from activist investor Carl Icahn when it went private in a nearly $25 billion leveraged buyout in late 2013.

Elliott is also in the midst of a longstanding battle with EMC Corp., which has so far refused to follow the activist investor's advice and split up the company. Elliott and EMC have been under a truce in recent months, but the suspension of hostilities is set to end next week.

Citrix signed a "cooperation agreement" with Elliott in June, and the company said it has initiated a search for a new CEO to replace Mark Templeton.

PUBLISHED SEPT. 23, 2015