Citrix Systems Plummets on Earnings Warning
By Matt Paolucci

Shares of Citrix Systems (CTXS), which makes software that enables networked computers to run Windows applications from a central server, dropped by as much as $19.50, or 52 percent today, after warning that second quarter earnings estimates would be substantially below Wall Street estimates.

Analysts, according to First Call, were looking for second quarter earnings of 21 cents per share. Today the Ft. Lauderdale- based company said it sees second quarter earnings in the range of 9-11 cents per share.

Citrix shares ended the day down 46 percent, or $18.94, at $22.25 in Nasdaq trading. CTXS was the most-heavily traded issue on the COMPX as more than 94 million shares exchanged hands.

Dain Rauscher Wessels analyst Sarah Mattson cut her rating on the stock from Strong Buy to Buy, citing indications that Citrix's business might experience a lag during the current second quarter. Mattson left her revenue and earnings forecasts unchanged, but cut her 12-month price target on the stock by $45 per share from $135 to $90.

Citrix could not immediately be reached for comment.

CEO Mark Templeton cited three main reasons for the lower results: The faster-than-expected transition from a shrink-wrap "box" licensing model to a paper/electronic licensing model, explaining that the paper deals are larger and take longer to close. Second, the expansion of core business within large enterprise accounts is progressing more slowly than expected. Templeton said the trend would continue to impact business through the second half of the year. Third, the Company's expansion of business in certain markets, including Asia, has been slower than expected.

Company officials conceded that they misread changing trends in the way software is delivered and that they relied heavily on sales of Microsoft's new server operating systems, which they overestimated.

One troublesome sign was the lack of attendance from Citrix CFO John Cunningham at a Painewebber investor conference last Thursday. Cunningham was cited as absent for "personal reasons." Chris Phoenix, the company's VP and General Manager ended up giving a speech in his place. If things were bad, the Company should have simply been more forthright. Investors would much prefer honesty to deception.

Not surprisingly, Edward Kerschner, chairman of the PaineWebber Investment Policy Committee, deleted Citrix from the firm's highlighted stocks list.

PaineWebber analyst Don Young chimed in, cutting his rating to Neutral from Buy and dramatically lowered his target price from $105 to $30. Now that's a downgrade. Young also cut his 2000 EPS outlook to 64 cents a share from 91 cents and his 2001 view to 90 cents a share from $1.10.

"While we believe server-based computing will continue to be a healthy trend, we believe Citrix may be challenged to grow at faster than 25 percent longer term," said Young.

Analyst Peter Ausnit at Prudential also lowered his rating on Citrix from Accumulate to Hold, and withdrew its price target.

The Florida-based company said it expects revenue of $105 million to $110 million, up from $94.4 million a year earlier.

Citrix said it would announce final results for the second quarter on July 19, 2000, at 5:00 p.m. ET.