Citrix Systems Inc. (CTXS) is focusing on international (outside North America) expansion to augment its global market share in the virtualization, collaboration and cloud computing segments. Recently, the company has entered into a definite agreement to acquire Netviewer AG of Germany.
Netviewer is a privately held Software-as-a-Service solutions provider. This deal is expected to be closed by early 2011 although the financial terms are still undisclosed.
Netviewer has more than 18,000 customers across several European countries such as the UK, France, Germany, Switzerland, Austria, Benelux, Italy, Spain and various Nordic countries. The acquisition of Netviewer will allow Citrix to significantly expand its presence in Europe.
Citrix will integrate Netviewer in its Online Services division. Citrix Online Services segment consists primarily of fees related to online service agreements and are recognized ratably over the contract term and generates approximately 20% of the company’s total revenue.
Citrix is reaping the benefits of globalization as well as the growing popularity of the virtual office concept. To maximize profit, business enterprises continue to enter markets all over the world. Virtualization and cloud computing has become one of the most effective tools to slash costs as enterprises expand.
We believe Netviewer acquisition will help Citrix to compensate some of its losses in the server virtualization market. The server virtualization market is intensely challenging and is increasingly becoming commoditized. Citrix entered server virtualization market two years ago with the acquisition of XenSource. However, the company could hardly establish a foothold in this segment and is gradually losing market share to both VMWare Inc. (VMW) and Microsoft Corp. (MSFT).
We maintain our long-term Neutral recommendation for Citrix. Currently, it is a Zacks #3 (Hold) Rank stock.
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