Citrix revenues rose by 17.8 per cent, to $472.2m in the third quarter, while net income climbed 64.3 per cent, to $81.5m.
The company is bundling just about every virtual PC, server, and application product that it has into the XenDesktop 4 Swiss army knife while pushing upgrades from XenApp at a discounted price, and the strategy as paid off.
"We're going into Q4 with solid momentum in most areas of the business," said David Henshall, chief financial officer at the increasingly virty software maker and services supplier, "even though we are a little cautious about EMEA."
In the third quarter, product license revenues hit $151.8m (up 17.6 per cent), with license updates coming in a little skinnier at $174.1m (up 15.3 per cent). Online services sales from the GoTo family of products rose to $91.7m (up 16.2 per cent), and technical services revenues hit $54.7m (up 30 per cent).
By geography, excepting online services, which swear no fealty to any country but the Internet, Citrix booked $217.3m in sales in the Americas, up 22.2 per cent compared to the year-ago quarter, while sales in the Pacific region (including Asia) rose by 27 per cent to $40.6m. The EMEA business continued to struggle, rising only 9.1 per cent, to $122.6m, and actually falling two points sequentially.
One interesting tidbit: Henshall said that Citrix did $620m in product license revenues for all of 2008, and given the current guidance, the company should hit somewhere between $610m and $620m. In effect, the recession is over and Citrix has survived a bumpy transition from Presentation Server (the predecessor to XenApp and a bit of a one trick pony) to XenApp and its hodgepodge of virtualization tools.
The Desktop Solutions group at Citrix is the breadwinner, of course, and includes the XenApp application virtualization tool, the new XenClient bare-metal hypervisor, and the XenDesktop virtual desktop infrastructure and streaming middleware that includes XenApp and XenClient in a bundle.
Henshall said that Citrix added 2,000 customers for XenDesktop in the quarter, and pushed approximately 500,000 seats in various forms, with the total installed base of XenDesktop seats now cresting above 4 million seats. Because of the expiration of a long-running trade-up deal from XenApp to XenDesktop 4 that expired at the end of the second quarter, sequential license deals were down 6 per cent in the Desktop Solutions group, but licenses were up 5 per cent year-on-year. XenDesktop license revenues were up 17 per cent sequentially, bucking the decline in sales for XenApp as a standalone product.
Of the 19 deals that Citrix did with over $1m in revenues, ten of them included XenDesktop, and because more than two thirds of the customers buying XenDesktop 4 or upgrading it are going with the Platinum Edition (which has all of the virtualization bells and whistles), Mark Templeton, president and chief executive officer at Citrix, said in a call with Wall Street analysts that the average selling price of a XenDesktop seat was now well over $100 a pop. The company did 85 XenDesktop transactions for over 1,000 seats and did 13 with over 5,000 seats. So the era of proof-of-concept for unified desktop virtualization and application streaming seems to be ending for a significant number of customers.
Templeton said that Citrix was on track to convert about 15 per cent of the XenApp installed base to XenDesktop, thanks to the aggressively priced upgrade promotion that was in effect in the first half of 2010 and a less-generous deal that would run through December. While Templeton made no commitments about extending the current deal out into 2011, he did say that the company was mulling the idea of making a trade-up (almost certainly with fewer goodies and higher costs than the current promotion) a natural part of the upgrade path from XenApp to XenDesktop.
"We can do better in 2011," Templeton said. Although without goosing the promotion instead of cutting back, it is tough to see how unless the feature set of XenDesktop is so compelling that companies are ready to start virtualizing their end users' PCs and applications at greater rates than they are currently doing.
In the company's Data Center and Cloud division, which includes its XenServer server virtualization hypervisor and related management tools as well as its NetScaler physical and virtual network acceleration appliances, revenues hit $84m, up 47 per cent from the year ago quarter. NetScaler appliances in both their physical and virtual formats were the key drivers here, with high-end NetScaler MPX physical appliances selling well and NetScaler VPX virtual appliances (which only began shipping in September 2009) grew 40 per cent sequentially. Citrix did not break out revenues for XenServer, but did add that it is increasingly a component in XenDesktop deals as the virtualization engine for VDI setups.
Citrix generated a record amount of cash in Q4 at $190m, and ended the quarter with $1.6bn in cash and equivalents; it has $680m in deferred revenues, up 23 per cent compared to the year-ago period.
Looking ahead, Citrix said that it believed sales in the fourth quarter would come in between $500m and $510m, because renewals for XenApp and XenDesktop were strongest in the final quarter of the year historically. Non-GAAP earnings per share is anticipated to be in the range of 50 to 60 cents. That puts the full 2010 year at somewhere $1.85bn, plus or minus $50m and non-GAAP EPS at $2.02 to $2.03. Just for fun, Citrix ran some models and said that it believed that in 2011 it could reach somewhere between $2.04bn and $2.07bn. The company did not provide guidance for non-GAAP EPS for next year, but will probably do so as 2011 moves along. ®