Citrix Systems Inc continues to demonstrate that it is possible to both cooperate and compete with Microsoft, and yesterday posted yet another strong quarter. Net revenue for the second quarter of 1999 was $94.4m, up 68% from the $56.2m it reported in the same period last year. Excluding the amortization of intangible assets, net income for the period was $27.8m, or $0.29 per share, a penny over analyst expectations. Last year net income was $9.6m, or $0.11 per share.
MetaFrame, the company’s mainstream server product which turns Windows NT Terminal Server into a multi-user system, accounted for 42% of the revenue during the quarter, with the older WinFrame product now reduced down to a 2% share. Sales of add-on options, rather than the base server products, made up 42%. Royalties from Microsoft, under the existing five year agreement between the two, came to 11% of revenue. Services made up 3% and OEM sales 2% of the total.
Citrix says that interest in centralized server-based computing remains strong, and that its business is being driven by demand for larger server setups. While unit base server sales remained somewhat flat, Citrix saw a large increase in bumps (its name for user upgrades to support larger numbers of users). Some customers also began buying systems measured by the overall number of seats rather than by the number of servers, under a more flexible licensing scheme the company introduced during the quarter. SAP AG has now installed a 1,000 user based Citrix system internally, running its R/3 graphical user interface, and other customers are also deploying large-scale systems, said Citrix.
Application server provider business is beginning to make an impact on the market, but it’s still to early predict the ultimate form it will take said Citrix president and CEO Mark Templeton. But there’s a clear demand for fee based applications across the network he said, predicting that the market would take off first in the mid-range – where Citrix is strongest – before reaching consumer and enterprise markets. But, said Templeton it won’t happen overnight – we view it as a long-term opportunity requiring careful execution and planning.
Templeton insisted that the forthcoming launch of Microsoft’s Windows 2000 was an opportunity, not a threat, and would give Citrix a broader base of platforms for Citrix server products. In theory, Microsoft’s RDP Remote Desktop Protocol could replace Citrix’s ICA protocol in Windows 2000, but in reality users appear happy enough to stay with Citrix, which is currently boosting up the capabilities of ICA from a simple protocol into what it styles as a fully fledged computing architecture. Citrix, which is working jointly with Microsoft on multi-user extensions to Windows 2000, says it knows what to expect and has its own product plans in place. In any case, it says, it doesn’t expect to see serious deployment of Windows 2000 until half way through next year. During the third quarter, Citrix shipped the beta version 1.8 of MetaFrame for Windows 2000, and says it has seen 30,000 downloads to date, its biggest ever beta program.
Meanwhile Citrix has its non-PC web and multi-tier developments, strengthened with its acquisition earlier this month of Viewsoft Inc (CI No 3,701). Even here, however, Citrix aims to target the Microsoft world first with ViewSoft’s front-end interface technology, initially focusing on Microsoft DNA digital network architecture systems. After that, it says, it will look at providing similar technology for Enterprise Java Beans. Citrix says it is also starting to see growth in the non-PC network appliance market, most notably from IBM Corp’s Network Stations, which are being used for green-screen terminal replacements by mainframe users.
