Sources: Citrix Mulling Sale Or Spinoff Of Its Online Services Unit

Citrix Systems is considering a sale or spinoff of its online services subsidiary, which includes its GoToMeeting Web conferencing and GoToMyPC remote access apps, sources familiar with the matter told CRN this week.

Citrix is facing growing competition in several key business areas and last week issued a profit warning for its current quarter. Selling or spinning off the online services unit could give Citrix some much-needed financial flexibility, according to the sources, who all didn't want to be named.

Shedding its online services business could also help Citrix concentrate on core businesses like desktop and application virtualization, said the sources.

[Related: Citrix Product Marketing VP Jumps To Startup As Acquisition Talk Heats Up]

Citrix hinted in a blog post last week that it's planning to deliver XenDesktop and XenApp as cloud services and would have more to share at its Synergy conference next month. Some of CRN's sources said they think Citrix may be transitioning to become a cloud service provider.

A Citrix spokeswoman told CRN the company "doesn't comment on rumors about our business."

Citrix acquired GoToMyPC and GoToAssist in 2003 via its $225 million acquisition of Expertcity, a Santa Barbara, Calif.-based vendor that was an early entrant to the SaaS market. Citrix also acquired the technology assets for GoToMeeting, which it released the following year.

Over the years, Citrix has added to its online services portfolio through acquisitions such as ShareFile (file sync and sharing) and Podio (project collaboration).

The potential sale or spinoff comes just three months after Citrix said it would eliminate 700 full-time and 200 contract positions as part of a corporate restructuring around its cloud, networking and enterprise mobility products that is expected to result in $90 million to $100 million in pretax savings.

One Wall Street analyst familiar with Citrix's plans, who didn't want to be named, told CRN he thinks Citrix's online services division "could be worth a couple billion dollars" if it were spun off as a separate entity and floated on the public markets.

A Citrix online services spinoff would make more sense than a sale, because some products in the portfolio are integral parts of the Fort Lauderdale, Fla.-based vendor's go-to-market strategy, the analyst said.

One example is ShareFile, which saw revenue grow 60 percent year-over-year in its fiscal fourth quarter and is one of its fastest-growing products. GoToMeeting is part of Citrix's Communications Cloud, a suite of SaaS apps that accounted for 60 percent of its overall SaaS revenue during the quarter.

Citrix's total SaaS revenue was $168 million last quarter, up 10 percent from last year's quarter.

Citrix partners said a sale or spinoff of the online services division would also sharpen Citrix's focus on battling VMware, which bundled application virtualization with its desktop virtualization software last year and is going hard after Citrix's customers.

Meanwhile, the recent trend of high-ranking executives' leaving Citrix shows no sign of stopping.

Brad Pedersen, chief architect and senior fellow at Citrix, is retiring at the end of April. He was employee No. 7 at Citrix, joining the vendor in 1989. Pedersen built Citrix's Independent Computing Architecture protocol, which underpins many of Citrix's products and is now called HDX.

Catherine Courage, senior vice president of user experience and a six-year Citrix veteran, "is leaving to spend some time with her family," the Citrix spokeswoman said last week in an email.

Sudhakar Ramakrishna, senior vice president and general manager of Citrix's Enterprise and Service Provider Division, is leaving at the end of May after two years with the company. Rakesh Narasimhan, who joined Citrix in January 2014 as vice president and general manager of its application and desktop virtualization business, left in February.

Earlier this month, Matthew Morgan, a Citrix vice president of corporate product marketing for the past two years, left to take the same role at big data startup Hortonworks.

Last week, Citrix cut its earnings estimate for its current quarter from 70 to 72 cents per share to 63 to 65 cents per share, and lowered its revenue forecast from $780 million to $790 million to $755 million to $760 million.

"We underestimated the impact caused by our restructuring, organizational evolution, and changes to our field and channel strategies, which were the result of important decisions made to get the business ready for our next phase of growth," Citrix CEO Mark Templeton said in a statement last week.

Citrix reports fiscal 2015 first quarter earnings April 22.

PUBLISHED APRIL 14, 2015