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April 9, 1997updated 05 Sep 2016 12:10pm

CITRIX REELS FROM THE MICROSOFT BODY BLOW

By CBR Staff Writer

From Computer Business Review, a sister publication.

On February 27, Ed Iacobucci, chief executive of Citrix Systems Inc, the Fort Lauderdale, Florida-based applications server software supplier, attempted to quash industry speculation over the future of his company. Borrowing a line from Mark Twain, he told analysts, Reports of my death have been greatly exaggerated. Despite Iacobucci’s apparent good humor, Citrix’s future was indeed hanging in the balance. The previous day, software giant Microsoft Corp had announced plans to incorporate multi-user server-centric technology into future releases of its Windows NT operating system, enabling users with ‘thin client’ devices or low specification personal computers to hook to NT server-based applications running on a central server. Given that Microsoft had previously endorsed Citrix’s WinFrame software to do that very job, the announcement seemed to all but eclipse Citrix’s role in the burgeoning network-centric computing environment. That was clearly the way a large band of Citrix’s shareholders saw it. Despite Iacobucci’s protestations, the company’s share price plunged 60% the day following the announcement, falling to $11.25 from $26. This disastrous turn of events was a far cry from the dazzling performance demonstrated by Citrix during 1996 when the company’s revenues soared 300% to reach $44.5m, up from just $15m in 1995. Exactly how Microsoft’s announcement will affect Citrix in the longer term is not yet known. Microsoft remains intractable about its future plans, and although it is currently developing multi-user technology in- house, it admits that ultimately, it may be forced to license technology from another company. Citrix and WinFrame, say analysts, seem the most obvious bets to be that someone and something. The two companies already have a relationship – Citrix has for some time licensed Microsoft’s NT technology in order to produce WinFrame – and according to Mark Templeton, vice president of marketing at Citrix, Microsoft has approached the company with a view to licensing its technology. The deal, however, is far from signed. Microsoft has publicly said that, if it cannot agree terms with Citrix over the use of WinFrame technology, it will either develop its own software or license technology from another source. But analysts believe this statement could be a ruse by Microsoft to try to pressure Citrix into agreeing to its terms. It is an obvious move to make – if Microsoft was to go elsewhere for the technology, Citrix could find itself searching for a new business in which to get involved. Iacobucci is, however, sanguine, saying that talks between the two companies are on-going. The fact that we’re still here [negotiating] bodes well, he says. In Citrix’s favor, according to analysts, there are no obvious alternate suppliers of multiuser access technology today and Microsoft’s development efforts are still believed to be in the early stages. Although Microsoft claims it has demonstrated technology to Citrix, Templeton says that Microsoft doesn’t have the specifications yet. If Microsoft does release a multi-user server-centric version of NT, he says, it is likely to be NT 5, which is not scheduled to appear until late 1998 at the earliest. Citrix is also denying that its business rests entirely on the future of WinFrame’s multi-user technology. According to Templeton, it is only part of WinFrame’s wide-ranging capability, and Microsoft’s plans, therefore, will not affect demand for the product. Citrix knew the risks from day one, says Templeton, and took action accordingly to develop alternative strategies. Indeed, these risks were clearly outlined to investors when the company went public in December 1995. Nevertheless a number of shareholders are furious. In March, they filed a class action suit accusing Citrix of failure to fully disclose information regarding potential competition from Microsoft. The suit also contends that the company subsequently denied rumours that Microsoft was considering direct competition with Citrix, despite knowledge to the contrary. To date, Citrix has refused to comment on the lawsuit, but all the indications suggest that the road ahead will not be smooth for the company.

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