Citrix – Sorry, we didn't realise job cuts would knacker results

Redundancies and FX volatility cut down profits by 48%

Citrix dropped the ball in Q1 by underestimating the short-term effects of chopping hundreds of staffers as part of a company-wide restructure, and the challenge posed by the swollen dollar.

The firm previously warned shareholders and Wall Street analysts a fortnight ago that sales and earnings per share would come in lower than expected.

Revenues grew one per cent to $761m; Citrix had originally issued guidance of $780-790m. Products and licences slumped 12 per cent, SaaS jumped eight per cent, as did licence updates and maintenance, and professional services slid 13 per cent.

Sales in EMEA were up one per cent. They decreased by one per cent in the Americas and fell two per cent in the Pacific region.

“We are disappointed with the financial results for the quarter,” said the multi-titled David Henshall, who juggles the exec veep, CFO, COO and principal financial officer roles.

“We experienced a greater than anticipated impact due to our restructuring, org and leadership evaluation and changes to our field and channel strategies,” he added.

The firm expunged 700 full-timers worldwide and sent 200 contractors packing to counter falling profits and to allow more spend on R&D. The action were completed in the US and will be done overseas in Q2. The moves include cutting out some layers of middle management.

One person to leave is Kevin Bland, senior sales director for channel and alliances EMEA. He moved to the same role at BlackDuck Software this month.

Citrix is also consolidating real estate and began to reduce leased facilities by 15 per cent.

“So far, six offices have been closed and we’ve reduced space in five others,” said Henshall. Another six locations are under the glare along with a “few more complex initiatives”.

A specialisation programme was launched by Citrix in January, tied to market and products. In the Americas, field reps are “aligned” to resellers and integrators so they are “partner led, partner driven”.

“They get up everyday and they are not thinking about named accounts,” said CEO Mark Templeton. “[They are] working collaboratively with partners to develop the joint go-to-market plan and make sure they have a specialisation that caters to the kind of business that they built."

It therefore seems a strange choice to get rid of Bland in EMEA.

In the quarter, the Workspace Services business grew two per cent year-on-year to $391m, Mobility Apps was up eight per cent to $169m and networking fell three per cent to $161m.

Some Windows App delivery projects were delayed “due to a range of factors, including the impact on pricing from currency, generally extended approval cycles as well as our own execution”, said Henshall.

The decline in networking came from the telco-focused Bytemobile biz and some cloud service segments, he added. The Bytemobile team was restructured, “realigning the account coverage and strategy”.

“The significant increase in FX volatility this year impacted results, as well as customer buying behaviour,” the exec said. "We saw a number of cases where decisions were delayed, where the value of the opportunity had decreased due to pricing or budgets.”

Citrix said forex drove $8m of expense that was included in the "other income" section of its numbers.

Operating expenses jumped by nearly $32m to $576.4m, pushing down operating income 28 per cent to $51.7m. After tax, Citrix made a net profit of $28.8m, versus $55.9m last year.

Citrix is learning from this quarter’s forecasting balls-up – sales guidance for Q2 of $785-$795m takes into account the impact of restructuring, FX volatility and the higher-than-normal deferral rate on bookings. ®

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