From: Susan Wilhite (MKT-US)
Sent: Thursday, August 05, 2010 2:28:21 AM
To: Roger Knott (MKT-US); Newsbank
Subject: RE: Analyst Report on Citrix Earnings
Auto forwarded by a Rule
“While we expect desktop virtualization revenue to pick up materially, this is still a longer-term growth opportunity.”
This coincides with the findings in my recent Core Tech study. While investigating other issues, we found that, large enterprises and medium, these customers are holding back for now on VDI implementation in favor of immediate focus on server virtualization. Not that we can exactly relax, but maybe we can exhale.
The four customers in the study are Autoliv, Boeing, Baptist Healthcare in Kentucky, and Hy-Vee. Quoted from the report:
Virtualization and related priorities
None of these four customers is seriously deploying VDI within the next few years. Desktop virtualization amounts to an uncalled-for risk. For now, server virtualization is the priority. The reported benefits are cost reduction, ease of management, and limited server downtime. This effort drives a strong interest in Deep Security, about which they need more information to plan and act.
Although wide use of thin clients could be a step toward VDI, even for that these customers are in various stages of low readiness. Successfully securing mobile consumer devices and integrating collaboration platforms such as SharePoint, SalesForce, or SocialText (for migrating away from email) are often more immediate priorities.
Hy-Vee enjoys being a model for HyperV at conferences. The other three customers use VMware. Only existing security is deployed on these servers.
From The 451Group.com
Citrix Q2 results show significant boost in desktop virtualization revenue
Citrix comfortably beat analyst expectations for the second quarter of 2010 and chose to highlight the desktop virtualization business during its earnings call on July 28. Revenue came in at $458.4m, up 16.7% year on year, and income rose to $47.6m, up from $42.5m in its Q1. The company's XenApp to XenDesktop two-for-one trade-up program helped to drive desktop virtualization revenue of $60m in the quarter, with another $30m going to the balance sheet. While we expect desktop virtualization revenue to pick up materially, this is still a longer-term growth opportunity. The company's NetScaler (up 20% Y/Y in Q210) and GoTo (up 16%) businesses were given relatively little fanfare by management during the call, despite their continued impressive performance.
The 451 take
Revenue at Citrix is now divided into three main buckets: virtual desktops, virtual datacenters and virtual meetings. The desktop business had a big quarter, and continues to show promise, generating $290m overall, with 15% growth from Q209. The majority of this came from its XenApp terminal-services line, but $60m of it was XenDesktop revenue, with another $30m going to the balance sheet as deferred. Of that $60m, two-thirds came from new licenses, and the rest from license updates – the result of the 2:1 licensing trade-up offer available to legacy XenApp users. (This was introduced with the launch of XenDesktop 4.0 in October 2009, the first product to merge XenApp and XenDesktop under a single licensing scheme.) Given the success of the trade-up program, the company is extending the offer; it believes the total available market for upgrades stands at about 10-15 million licenses – meaning it has harvested only around 10% of the opportunity so far. Under the terms and conditions of the trade-up, the average selling price works out to be in the $40 range, but Citrix still expects pricing to increase through increased sales of top-end versions that fetch much higher license fees. In addition, the company announced a 25% price increase to its channel partners during Q2, following a promotional pricing period, which has been met with little resistance. Of the 18 $1m-plus deals signed during the quarter (including several over $5m), 13 included XenDesktop, and the average deal size for XenDesktop is now three times that of XenApp. Of the XenApp licenses up for renewal, 20% traded up for XenDesktop licenses, an increase from 105 in Q110.
The virtual datacenter bucket includes the newly introduced XenServer 5.6 infrastructure for enterprise servers and private and public clouds, as well as the NetScaler network application-delivery software and appliances. This business saw 20% growth to $74m during the quarter, with Rackspace the most significant customer win in the cloud sector for XenServer. NetScaler 9.2 was released during the quarter, along with a new NetScaler VPX virtual appliance, upgraded MPX hardware appliances and more flexible licensing terms. The number of new customers increased by 50%, and Citrix claims NetScaler now supports around 75% of all internet users. Q210 also witnessed an increase in organic market demand, with $149m of combined desktop and datacenter revenue coming from new licenses – up 15% Y/Y. Growth was attributed to Windows 7 upgrades and refresh cycles, in addition to the company's increasingly significant ability to support several mobile computing devices through the free Citrix Receiver app, particularly the Apple iPad, but also iPhone, Android, BlackBerry and Windows Mobile devices. There have been a million downloads so far – 700,000 of them this year. A GoToMeeting client was also released for the iPad during the quarter.
That brings us neatly to the virtual meetings bucket. The GoTo/software-as-a-service product line from Citrix Online (which originated from the $225m acquisition of ExpertCity in 2003) saw 18% growth to $89m. Specifically, GoToMeeting grew by 16% Y/Y in Q210, and GoToWebinar increased 40% Y/Y. As a stand-alone division, Citrix Online can now be measured as the fifth-largest SaaS business in the market.
Since it acquired XenSource in August 2007 for $500m, Citrix has been positioned as a head-to-head competitor with VMware. While VMware remains significantly ahead with its back-end enterprise-class virtualization stack, Citrix has a natural advantage on the desktop, where its existing user base of terminal services users are an obvious starting place for new business. During Q2, Citrix beat VMware to market with the first public release of a client-side hypervisor from one of the major virtualization players, although it's still early days for this technology, even for Citrix. The XenClient was developed in collaboration with Intel, and currently works only with Intel vPro-enabled systems. VMware recently put back its own efforts to release a client-side hypervisor, according to reports. Citrix can now claim more convincingly that it offers a wider range of desktop offerings than VMware: not just virtual desktop infrastructure, but also application virtualization (i.e., traditional hosted desktops), as well as local desktop virtualization of PCs and laptops through its client hypervisor.