Citrix 1Q Profit Slips 7.1% As Margins Weaken; Lifts Full-Year View

Citrix Systems Inc.'s (CTXS) first-quarter profit slid 7.1% as the software maker reported weaker margins and higher expenses, though revenue topped its expectations.

However, shares jumped 6.4% to $82 after hours as the Citrix's adjusted earnings also beat its estimates and as the company lifted its full-year guidance.

Citrix now sees full-year adjusted earnings of $2.75 to $2.79 a share and revenue of $2.53 billion to $2.56 billion, up from its prior guidance of $2.70 to $2.74 a share and $2.49 billion to $2.51 billion, respectively.

For the second quarter, Citrix predicted revenue of $605 million to $615 million, above the $603 million estimate from analysts polled by Thomson Reuters. Citrix sees second-quarter adjusted earnings of 58 cents to 59 cents a share, below analysts' estimated 63 cents a share.

Citrix improves efficiency by allowing multiple systems to operate on one computer. The company has posted double-digit revenue gains over the past two years as its desktop-solutions business, which includes XenApp and XenDesktop, has seen its growth accelerate due to the increasing importance of desktop virtualization. Ahead of the results, Nomura noted earlier this month that Citrix's XenDesktop and NetScaler software now face more difficult year-over-year comparisons, but the company will see greater benefits from its recent expansion of its direct sales force as the year progresses.

Last week, competitor VMware Inc. (VMW)reported its first-quarter earnings rose 52% on double-digit revenue gains from services and licenses.

Citrix reported a profit of $68.3 million, or 36 cents a share, down from $73.5 million, or 39 cents a share, a year earlier. Excluding stock-based compensation and other items, earnings rose to 59 cents a share from 50 cents a share a year earlier. Revenue increased 20% to $589.5 million.

In January, Citrix had predicted a profit of 49 cents to 51 cents a share on revenue of $555 million and $565 million.

Gross margin narrowed to 85.4% from 87.8% as input costs climbed 44%. Total operating expenses rose 21%.

Revenue from product licenses, or new product purchases, rose 19%, while revenue from license updates, including annuity revenue from subscriptions paid when new licenses are purchased, climbed 19%. Software-as-a-service revenue was up 21%, while professional-services revenue rose 33%.

The stock is up 27% since the start of the year.

 
   -By Nathalie Tadena, Dow Jones Newswires; 212-416-3287; [e-mail]