The CEO of $13 billion Citrix says it's 'flattering' that there are so many rumors that it's going to get acquired: It shows 'we're important'
- David Henshall, CEO of cloud software giant Citrix, called the persistent rumors that it's looking for a buyer "flattering."
- He said the recurring speculation shows "we're an important part of the industry."
- While Citrix has posted gains under Henshall, a sale is still possible, analysts say.
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Ever since he took over as CEO of Citrix two years ago, David Henshall has had to deal with a recurring rumor about the cloud software giant - that it's about to be sold to potential buyers like Microsoft.
Indeed, as recently as April, it was reported that the company was looking for a buyer willing to pay $15 billion, which would be a premium of about $2 billion over its present market cap.
"The topic has come up dozens of times over the years," Henshall told Business Insider. And he's come up with an upbeat way to explain such potentially disquieting chatter to his employees.
"What I tell our team is that the speculation is a reflection of how successful we've been in building relationships with enterprise customers around the world," he said. "The speculation is flattering. It means we're doing something right. We're an important part of the industry."
A market leader
Citrix certainly plays a key role in the enterprise tech market. It is the number-one provider of virtual client computing software, which lets the IT department provide employees access to virtual PCs hosted from their network.
Citrix controlled 34.2% of that $4.5 billion market in 2018, followed by Microsoft with 20.7%, VMware with 19.2%, Amazon with 5.6%, and Huawei with 1.4%, according to IDC.
Founded in 1989, the Fort Lauderdale, Florida-based company is also one of the pioneers of software-as-a-service, which transformed business applications into a web-based service sold based on subscription or pay-per-use models.
But Citrix went through big changes recently - changes that were at times rocky and which in part led to speculation that it may be an acquisition target.
The company went through layoffs and the departures of key execs in 2015. Then two years ago, the company spun off its GoTo line of online meeting products, and then merged the new corporate entity with remote desktop company LogMeIn. Later that year, Citrix made the surprising announcement that then-CEO Kirill Tatarinov, who took over the previous year, was leaving, a change described as a "mutual separation decision" by the board and Tatarinov.
He was replaced by Henshall, a Citrix veteran who has served as the firm's chief financial officer and chief operating officer.
All the while, those acquisition rumors have swirled.
Cloud computing explosion
Citrix has benefited from the growing push towards cloud computing: Its products and services are especially well-suited to helping employees access their work apps and data from any device, including their smartphones.
"Over the last five to six years, we've been in this cloud mobile era," Henshall said. "The possibilities just exploded exponentially. ... That's been amazing from a flexibility standpoint, but it's created a huge amount of complexity."
Henshall said Citrix is focused on making these dramatic changes in enterprise IT more manageable for companies in a time of rising concerns over security and setting up networks that become too complex for both IT managers and users.
This strategy is particularly focused on the rise of hybrid cloud, in which businesses store and process data and use applications on a public cloud, such as those run by Microsoft and Amazon, while still performing some of those tasks on their own data centers.
"Most of our customers are going to deploy some form of hybrid mode," he said. "That's how we've aligned our strategy in order to support that. They are moving somewhere between on-prem [on-premise data centers] and cloud. They need the flexibility to do both."
Stability and growth
Under Henshall, the company has found stability and modest growth amid the changes in enterprise technology. The company posted annual revenue of $2.97 billion in 2018, up 5% from 2017. The stock has risen more than 20% since he took over in 2017.
Analyst Carolina Milanesi of Creative Strategies Inc. called Citrix "an enabler of modern workflows," providing "flexibility that most millennials want in an enterprise environment both from a device and an app point of view."
But in an increasingly crowded cloud market, Citrix has been largely unsuccessful projecting itself as a broader cloud platform company, Milanesi said. Instead, Citrix is still known mainly as a maker of virtualization software for desktop computers.
"They have been in that space for so long and have been so popular with it that for most people that is the first time that comes to mind when you mention Citrix," she said.
Still, Milanesi said Henshall's experience and long years at Citrix as CFO and COO have clearly helped him as CEO.
"He has a deep understanding of the company and having been in different roles he can appreciate both operational as well as financial aspects of the business," she said. "He does not strike me a loner leader, he has a very strong management team who he leans into and works with which always makes for a stronger leadership."
Citrix is competing in an arena that's expected to go through a period of consolidation sooner than later. Oracle CEO Mark Hurd predicted in May that many of the smaller software-as-a-service players "will go away" as they get gobbled up by larger companies.
Henshall said consolidation has always been part of the business software market. "But even if there is consolidation, there are always new things that come along, adding value, changing the landscape, innovating and disrupting," he said.
Possible acquisition target
Milanesi said Citrix as an acquisition target is "certainly possible." But she disagreed with speculation that Microsoft, a long-time Citrix partner, would be a likely buyer.
"I would not think of Microsoft as a first contender," she said. "I think there are vendors in the PC market that want to get more in more into services for whom Citrix might be an interesting prospect to be able to offer a service that branch beyond PCs into phones as well."
Analyst Rob Enderle of the Enderle Group said Citrix faces a big risk from Microsoft which is "moving to the cloud aggressively."
"I doubt they'll buy Citrix since they really don't need them," he told Business Insider. "VMware would likely be the most interesting purchaser and they'd likely value the firm the highest, plus they use Dell's merger process which is the best in the industry right now."
Analyst Ray Wang of Constellation Research said he does not believe Microsoft would be interested in buying Citrix which he said is "doing much better under the new CEO."
"There is still a lot of interest in their products from the install base," he told Business Insider. "What they have is competitive in the cloud." But Wang said Citrix is now faces new competitors in the cloud market, including two growing communications platforms - specifically, the red-hot video conferencing app Zoom, and the communications developer platform Twilio, both of which compete with Citrix in certain markets.
Henshall stressed that the sale speculations are "nothing new."
"Our industry is always full of rumors of speculation," he said. "For the most part people are just focused on executing against our strategy. It's not really that big a distraction."
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