Citrix Systems Q3 2006 Earnings Call Transcript

| About: Citrix Systems, (CTXS)
TRANSCRIPT SPONSOR
Research2Zero Logo

Citrix Systems (NASDAQ:CTXS)

Q3 2006 Earnings Call

October 18, 2006 4:50 pm ET

Executives:

Jeff Lilly, Director, IR

David J. Henshall, Senior Vice President and CFO

Mark B. Templeton, CEO, President

Analysts:

Steve Ashley, Robert W. Baird

Phil Winslow, Credit Suisse First Boston

Kirk Materne, Banc of America

Sarah Friar, Goldman Sachs

Adam Holt, J.P. Morgan Securities

Todd Raker, Deutsche Bank Securities

Katherine Egbert, Jefferies & Co

Brent Williams, Hapoalim Securities

Dino Diana, UBS Investment Research

Manuel Recarey, Kaufman Brothers

Jason Kraft, Susquehanna Financial Group

Ed Maguire, Merrill Lynch

Rob Owens, Pacific-Crest Securities

Walter Pritchard, Cowen & Company

Operator

Good afternoon. My name is Katina and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Citrix Systems Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question and answer period. If you would like to ask a question during this time please press * then the number 1 on your telephone keypad. To withdraw your question please press * then the number 2 on your telephone keypad. Thank you. I would now like to introduce Mr. Jeff Lilly, Director of Investor Relations. Mr. Lilly, you may begin your conference.

Jeff Lilly, Director, IR

Thank you, Katina. Good afternoon everyone and thank you for joining us. On this call today we will be discussing Citrix’s third quarter 2006 financial results. Participating in the call will be Mark Templeton, President and Chief Executive Officer, and David Henshall, Senior Vice President and Chief Financial Officer. This call is being webcast with a slide presentation on the Citrix Investor Relations website and the slide presentation associated with the webcast will be posted immediately following the call.

Before we get started, I want to emphasize that some of the information discussed in this call may be characterized as forward-looking statements made pursuant to the Safe Harbor provisions of Section 21E of the Securities Exchange Act of 1934. Those statements involve a number of factors that could cause actual results to differ materially, including risks associated with the Company’s businesses involving the Company’s revenue growth, products, their development and distribution, product demand in the pipeline, economic and competitive factors, the Company’s key strategic relationships, the effect of new accounting pronouncements on revenue and expense recognition, including the effects of FAS 123R on certain of the Company’s GAAP financial measures, and acquisition and related integration risks.

Additional information concerning these factors is highlighted in the earnings press release and in the Company’s filings with the SEC, including the Safe Harbor disclosure contained in our most recent 10-K filing available from the SEC or the Company’s Investor Relations website.

Additionally, during this call we will discuss various non-GAAP financial measures as defined by SEC Regulation G of certain adjusted figures which include operating expenses, operating margin, operating and net income, and earnings per share. The most directly comparable GAAP financial measures and a reconciliation of the differences discussed on today’s call can be found at the end of our press release dated today and on the Investor Relations page of the Citrix corporate website.

Now, I’d like to introduce David Henshall, Senior Vice President and Chief Financial Officer of Citrix Systems.

TRANSCRIPT SPONSOR

Research2Zero Logo

Research 2.0 combines in-depth, theme-oriented technology investment research with a lightweight business model. Our approach is to concentrate our research energy and resources into areas not well-covered by existing firms. While other analysts are attending informational meetings with company managements, we are talking to customers. While other analysts are spending a huge chunk of their time each quarter on earnings releases we are doing hands on work with technology. While other analysts are focused on what amount to trading perspectives, we are working on long-term underlying trends that drive revenue, margins and long-term company valuation.

Because we leverage technology and new distribution models rather than traditional high-cost infrastructure, we can provide unique research in a much more cost effective manner.

Individuals can purchase an annual subscription, corporations and institutions can become sponsors or consulting clients. We also deliver a good deal of our content at no charge via our email list, blog, free publications and summaries of our other research reports.

To sponsor a Seeking Alpha transcript click here.

David J. Henshall, Senior Vice President and CFO

Thank you, Jeff, and good afternoon. In addition, to providing you with some commentary on the third quarter results, I’ll discuss the current trends in our business and provide you with our outlook for the fourth quarter and full year 2006. I will also provide you with some preliminary thoughts on the operating model for 2007. Beginning with our financial results I should note that certain numbers discussed are adjusted figures. Please refer to the press release on our Investor Relations website for a full reconciliation of adjusted figures to U.S. GAAP figures.

So, let’s take a look at the third quarter highlights: Total revenue was $278 million, an increase of 22% over last year. Our GAAP EPS was $0.25 compared to $0.23 a year ago. Our adjusted EPS was $0.34 compared to $0.29 last year, an increase of 17%. Adjusted operating margin was 26% and cash flow from operations was $70 million during the quarter, so overall a balanced quarter performance.

Now I’d like to discuss our revenue by product mix and geography as well as a few operating metrics. In the third quarter product license revenue was $113 million, representing 17% year-over-year increase. This growth demonstrates the continued strong adoption of our application networking solutions coupled with flat year-over-year growth in the app virtualization products, which I’ll discuss more in a moment.

Our online services grew to over $39 million in the third quarter, an increase of 49% over last year. The strength in this business was driven by the steady adoption of our GoTo products, especially GoToMeeting which grew approximately 200% year-over-year. Product license update revenue was up nearly $103 million, up 22%, and technical services which consists of consulting, education and support was approximately $23 million in the third quarter, up 19%.

As I mentioned earlier we continue to see momentum in the application networking group. On a normalized basis this business doubled year-over-year and contributed almost $30 million in total revenue, of which over $24 million was product license revenue. The strength continues to be driven by our NetScaler app delivery products as well as our SSL Access gateway. While a large part of this business is coming from internet-centric customers, we continue to invest in building out our GoTo market engine for the enterprise; in fact exiting the period we have increased the number of authorized partners in this space to over 300.

Separately, our app virtualization products which have experienced solid growth over the past few quarters were flat year over year. The first three quarters of 2006 were up about 4%.

Let me talk a little about some of the dynamics that we saw during the quarter. The release of Presentation Server Version 4 continues to do really well. In fact, PS4 has been our most rapidly adopted platform to date. This success has contributed to our growth in previous quarters and has helped build further and deeper penetration in the existing customer base.

With that said, as you know, the fourth quarter of 2005 and the first quarter of this year is when we implemented the end of sale for MetaFrame XP and the end of life of MetaFrame 1.8. This process has had a couple effects on the business. First, we believe this accelerated some purchases into the earlier periods impacting the revenue SKEWs seen in the last several quarters. And second, since we’re no longer offering these products for sale, many of our XP customers are now in the process of working through their migration plans to newer versions of the Presentation Server requiring an upgrade to their server operating system, which frankly takes time. We’d not be surprised to see this trend continue into the fourth quarter and early next year. So for the year, this product line should be flat overall growth in the low-to-mid single digit range consistent with our expectations.

Turning to revenue by geographic segment: the Americas region grew 22% year over year to $125 million, EMEA was up 17% over the third quarter last year to $91 million, the Pacific region grew 13%, and online software services which are not included in any of these geo segments grew 49% as I mentioned earlier.

Next, let me talk briefly about expenses and operations. Adjusted operating expenses in the third quarter were $186 million, up about 20% year-over-year and 2% sequentially. This annual increase was driven by several factors including the OpEx associated with recent acquisitions, ongoing headcount growth, and marketing programs.

During the quarter we added approximately 180 employees to the Company bringing the worldwide headcount to 3,630. The majority of the increase was driven by additions to our Citrix Online team, the sales and services group, and growth in A&G as a result of the Orbital Data acquisition.

Adjusted operating margins came in at 26% for the quarter, down from 27% last year. Going forward we’re going to continue to target our standing goal of operating the business in the mid-to-upper 20% range, and the big drivers in this area will be investment targeted at growing our online business in the international markets, building out the GoTo market engine for our newer businesses, bringing to market new products in the virtualization space, as well as infrastructure and systems work to position the company for sustainable growth.

On the balance sheet, deferred revenue grew $4 million sequentially bringing the total to $314 million. This total is up 23% from last year, driven mainly by our subscription advantage offering which saw renewal rates around 80%. Total cash and restricted cash and investments are now $800 million, down $100 million from last period, primarily related to the funds used in our stock buyback program and cash paid for the acquisition of Orbital Data. Specific to the stock buyback program the Company repurchased 4 million shares at an average cost of about $32.5 during the quarter.

And finally, cash flow from operations in the third quarter was over $70 million bringing trailing 12-month cash flow to over $305 million.

In summary, these results demonstrate the continuing progress the Company has made in executing against our strategy to build a complete platform to solve multiple access delivery problems for our customers and at the same time diversify the product revenue streams. We’ve managed this while still focusing on operational discipline and maintaining solid profitability.

Now I’d like to discuss our outlook and expectations for the fourth quarter and full year ending December 31, 2006. It should be noted that we’re about to make forward-looking statements that incorporate certain risks. Please refer to the Safe Harbor statements noted in our press release and the risks that are stated in our SEC filings.

As a reminder, in the first quarter, we began recognizing stock-based compensation under FAS 123R. While this number will be included in our GAAP results, it will be excluded from our adjusted results.

For the fourth quarter, we expect total revenue in the range of $307 million to $315 million of which we expect our online services to contribute $41 million to $42million in revenue, adjusted gross margin in the range of 92% to 93%, interest income of approximately $11 million, weighted average shares between $189 million and $191 million, and finally we expect earnings of $0.27 to $0.28 on a GAAP basis and adjusted EPS of $0.37 to $0.38.

For the full year 2006 we expect total revenue in the range of $1.12 billion to $1.128 billion, adjusted gross margin of about 93%, GAAP EPS to be in the range of $1.00 to $1.01, and adjusted EPS to be within a range of $1.37 to $1.38.

Looking ahead, I wanted to provide some early thoughts on our 2007 operating model. We’re looking for fast growth in the application networking products, which include web acceleration, WAN optimization, and SSL gateway. As a result, we expect overall company adjusted gross margin to trend downward by up to 200 basis points.

With more profitability coming from these businesses and other U.S sources, we expect the 2007 tax rate may increase by up to 200 basis points when compared to 2006, and with balance growth of investments to drive revenue we’ll continue to target adjusted operating margin in the mid-to-upper 20% range.

So, as these results show, we’ve built a very solid foundation to work from. Throughout the remainder of 2006 and entering 2007 we plan to build on our revenue momentum and make long-term investments in the business to grow the product platform and drive the continued adoption of the new and acquired products.

Now, I’d like to turn it over to Mark to give you additional details on the quarter’s performance and discuss our ongoing businesses. Mark…

Mark B. Templeton, CEO, President

Thanks David, and welcome everyone. Our third quarter financial results were solid delivering on top line growth of 22% and a strong adjusted operating margin of 26% for the quarter. Overall product license growth was excellent, up 17% over last year, and we had great performances in our application networking products and online software services.

As David mentioned, we expected a better licensing result in Presentation Server than we delivered, driven by a change in the SKEW of Presentation Server sales but in my view no change in any of the fundamentals. This was evident in the growth of our license update and technical services businesses. Both are leading indicators of the underlying value and customer confidence in our Presentation Server product.

Additionally as I’ve looked at the analytics, it’s very clear that our market fundamentals, the business and technical drivers of app delivery, remain strong. I spent a significant amount of time with customers in the third quarter in both North America and EMEA. I continue to be impressed with their use of Presentation Server and the increasing relevance of our infrastructure to the business.

The need for best-of-breed products that deliver applications over the network has never been stronger, giving us confidence in our strategy to provide on-demand application access powered by Citrix Application Delivery Infrastructure.

So next I’d like to talk about some third quarter highlights and key products and markets and add some color about our go-forward game plan. Centralizing the user tier through application virtualization is a proven powerful way to control the security, performance, and cost of that delivery. That means the value proposition of Presentation Server will continue to increase, a view that’s supported by continued strength in PS4 uptake, X64 growth, growth in license update renewals, and continued growth in the opportunity pipeline. Customers are moving more quickly than we anticipated to the 64-bit addition of Presentation Servers gaining greater scalability and performance while driving down cost on a per-user basis.

Recently we completed an X64 benchmark test in partnership with IBM. The test demonstrated 500 users of the SAP GUI, a very CPU intensive app on just one of IBM’s system X3950 Servers. This is the kind of scalability that we believe drives deeper and broader use of our app virtualization products. Looking ahead, the Ohio release of Presentation Server will include the first rollout of our Constellation technologies. For example, we’re incorporating high-performance graphic acceleration for 2D as well as medical applications, easier application provisioning with new server-to-server streaming and isolation technology, and greatly improve monitoring capabilities for better end-user reliability and performance.

The Ohio release is targeted at enabling our customers to virtualize more applications more reliably with fewer resources.

Next, let’s look at our application networking business. We just completed our first full year in app networking, one of the most exciting growth areas in our portfolio. In the third quarter these products were up sharply on both a sequential and annual basis. With more and more applications going to the web, products like NetScaler for web application delivery, WANScaler for WAN optimization, and Active Gateway for SSL access play a critical role in our infrastructure.

First up is the NetScaler product line which had another excellent quarter of growth, up 100% year-over-year. We continue to be the first choice for delivering external effacing web applications especially with E-commerce and internet-centric customers.

In the third quarter we added new customers such as YouTube, MySpace, Facebook, Netflix, Real Networks, Tickle, and Fly.com. These great web brands are following in the steps of long-time NetScaler customers like Google, eBay, ETrade, and Amazon, customers that rely on the performance and scalability of NetScaler as a core component of their dot.com businesses; increases in search, clicks, and E-commerce means NetScaler growth.

We’re also seeing continued growth in the broader enterprise web app delivery segment with significant NetScaler wins at customers like American Express, MGM Mirage, Thomson Financial, Dow Jones, and Estee Lauder to name a few. We’re making good progress with NetScaler in our application-oriented distribution and integration partners. Today, we’ve authorized over 300 NetScaler partners. Our enterprise installed base relationships are also producing lots of opportunities and also producing the need for deeper technical training and selling skills.

In response, we’re growing our field-based product specialist team, systematically training partners, and we’ll do the same thing in EMEA during 2007, all designed to see this market opportunity. At the same time, we’re driving innovation in web app delivery. Our NetScaler 7.0 release in the third quarter added more than 150 new capabilities, especially for enterprise customers. In addition to raising the bar on application layer performance, version 7.0 has more powerful policy management, improved health monitoring, enhanced security, easier configuration, and support for new app types like voice and IM, all of which make Citrix’s NetScaler the first choice for web app based deliveries.

Next up our SSL Access gateway; just six quarters after entering the SSL VPN market our Access gateway continues to gain market share, up 10 percentage points over the last four quarters. Access gateway has outperformed its nearest SSL competitor by more than 5x and now ranked second only to Juniper in share of market. This was amplified in the third quarter when we received Frost & Sullivan’s best product line strategy award for our Access gateway products.

Our application-centric market approach is differentiating us from network-oriented competitors. When customers choose Citrix for application delivery either through Presentation Server or NetScaler, we make it easy to extend secure access to those same applications with Access gateway. This unique strategy has given our sales team and channel partners a highly effective entry point that’s not possible for traditional SSL VPN players.

Next, I’d like to discuss our newest app networking product, WANScaler. On August 18th we closed the acquisition or Orbital Data entering Citrix into the fast growing WAN optimization market. The Orbital product line being re-branded as Citrix WANScaler adds a strategic building block to our end-to-end application delivery infrastructure, giving us a powerful new product line that optimizes application delivery for the branch user, where an estimated 55% of workers access their applications. We believe WANScaler will have great synergy with both our NetScaler and Presentation Server product lines and will become an important part of our product mix.

We’re getting WANScaler ready for launch in January at Summit 2007. In the third quarter we also announced a new strategic partnership with Microsoft, building on the potential in WANScaler technology. The partnership includes a significant multi-year investment from both companies, collaborating with Microsoft on an entirely new multi-function branch appliance that’s easy to remotely administer, that combines advanced WAN optimization with consolidated Microsoft Windows based branch office services.

This combination scheduled for a late 2007 release addresses unsolved application performance and management problems in the branch. We’re excited about extending our partnership with Microsoft and we believe that together we’re uniquely able to address this market need.

Next, I’d like to discuss the integration of the Relectent team and the launch of EdgeSight. Net-net the integration is running ahead of plan with phase one and two completed ahead of schedule. Early customer demand is excellent. IT organizations need the real-time visibility into actual end-user experience, which is exactly what EdgeSight provides. The early results are superb closing 21 transactions this third quarter, four were over $100,000. The leading indicators are very encouraging with over 60 pilots now underway, which is six times greater than before the acquisition, and that’s without a significant channel launch yet.

Last week, we announced the availability of EdgeSight 4.2. This began as the final integration phase that positions us for 2007 and a strong product launch in January during Citrix Summit, where we’ll also introduce further product enhancement. Next year, we’ll add support for the Ohio release of presentation server, add synthetic monitoring and load testing features, and we’ll introduce more in-depth application performance monitoring for both NetScaler and WANScaler. I expect EdgeSight to be a huge hit based upon what I’ve heard from customers and partners so far. I’m delighted by their interest in EdgeSight and even more delighted by the smooth integration process bringing the Relectent team on board, now known as our Management Systems Group and now completely focused on providing powerful management tools for application delivery.

Next, I’d like to highlight another excellent performance from our online division, our software as a service business, which contributed over $39 million of revenue in the quarter, up 49%. Citrix GoToMyPC grew over 30%, in fact we hosted more than 15 million remote access sessions in the third quarter, and I’m please to announce that version 6 of GoToMyPC just went to beta testers with support for audio, improved printing, file shrinking, and additional corporate security controls.

Our on-demand assistance product, GoToAssist, was up 27%, continuing to add marquee brands to the customer list. During the third quarter more than 3 million people received world class support from help desk that solved application access problems using GoToAssist.

The web’s fastest growing online collaboration tool, Citrix GoToMeeting, grew almost 200% in the quarter. During the third quarter we hosted over 1 million meetings, which means over 0.25 million people attended GoToMeeting. If you do the math that is nearly 100,000 meetings per week. Research shows that attending webinars over the internet is up 125% this year; enter the new Citrix GoToWebinar.

Citrix GoToWebinar is the first and only product built for the do-it-yourself webinars. We priced it for unlimited use and we’ve included it as an enhancement to the GoToMeeting corporate edition. The early results are excellent with over 100,000 people attending GoToWebinar in the short time since availability. We’re really bullish on real-time online collaboration. So that’s some color from our third quarter performance and now I’d like to turn to looking forward.

My takeaway from my recent time with customers is that IT organizations are stuck, caught between the realities of slow growing IT budgets and fast changing business needs. At this point, I hear agreement that IT systems are too static, too complex, and costing too much to maintain. I’ve never seen more pain. I’ve also never seen more holistic thinking about delivering applications over the network. I’m hearing IT ask for a better way, a better way to provide users access on demand from their office, from their family room at home, from a branch office, from an offshore facility or even from a safe location during a disaster. This is exactly what we’re offering -- application delivery infrastructure powered by our app delivery, app security, and app visibility products.

Next week in Orlando we will host our annual Global iForum event. Attendees will hear and see that only Citrix offers a complete application delivery infrastructure for a dynamic world. They’ll get a first hand look at our exciting product pipeline including EdgeSight and WANScaler demonstrated for the very first time on the Citrix brand. They’ll see the Ohio release of Presentation Server and the Delaware release built for the Longhorn Server platform, Project Pictor for delivering Open GL graphical applications, Project Tarpon for streaming applications to desktops and servers, and Project Kent for protecting the safety and productivity of employees during disruption, and we’ll have at least one or two surprises up our sleeve as well -- an exciting product pipeline, innovating at a rapid pace, offering the kind of flexibility, security, and efficiencies that businesses need from IT now and in the future.

This is the strategy we’ve been aggressively executing for several years now through intelligently building, buying, and acquiring new products through investing in a more diverse set of GoTo market models and by focusing on top line growth at solid operating margins. This is the operational formula behind our financial model driven by the introduction of acquired products to existing channels and customers, driven by building new channels to reach the network infrastructure buyer, and driven by the development of the largest pipeline of products in the history of Citrix. As we continue to execute, we’re scaling fast to where the profit is going to be. I’m more confident in our game plan than ever and Citrix is better and more determined than ever.

Thank you, and now we’ll open it up for questions.

Question-and-Answer Session

Operator

Ladies and gentlemen, at this time I would like to remind everyone if you would like to ask a question please press * then the number 1 on your telephone keypad. We’ll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Steve Ashley with Baird Securities.

Steve Ashley, Robert W. Baird

Mark, have you taken any steps to try to augment demand for the core CPS product with channel partners or are you going to do anything different in the fourth quarter to try to spur that demand?

Mark B. Templeton, CEO, President

Steve, sale cycles are such that we probably at this point can’t do anything to change the fourth quarter demand profile, and honestly we’re not really given to doing anything unusual when it comes to this kind of a question. So, what we are doing, however, is we’re taking lots of steps toward streamlining the product line, positioning it better for where customers are from a messaging perspective, which helps with the WAN generation in the field overall. Secondly, we’re SKEW’ing the rewards program the way we compensate our channel partners more and more toward those that participate in value-based selling and creating demand with existing customers. So, we’re focused on that, which is the push side of the formula. Then obviously by introducing new products that are derivatives on top of the Presentation Server based technical platform, that’s helping us get more leverage off the technology that we have. Examples there are access essentials, some improvements and additions we’ll make to that product line next year, our Project Pictor, Project Tarpon has some derivatives in that area, and so we’re doing a lot of things in that area to leverage the technology.

Steve Ashley, Robert W. Baird

And can you say when the XP versions will be end of life?

Mark B. Templeton, CEO, President

Our plan for end of life for XP I believe is the second quarter of next year, which really gets down to sort of the end of support, which does create an additional event and pressure for customers to move forward, and I think that we’ve been very consistent in our policies around how we do this -- trying to differentiate ourselves in being a customer partner that helps them move core infrastructure on a timeframe that really works best for them and building our policies around that.

Steve Ashley, Robert W. Baird

Great, and lastly David, just to confirm this, are you assuming in the core Presentation Server business flattish year-over-year license revenue in the fourth quarter?

David J. Henshall, Senior Vice President and CFO

Yes.

Steve Ashley, Robert W. Baird

Thank you.

Operator

Your next question comes from the line of Phil Winslow with Credit Suisse.

Phil Winslow, Credit Suisse First Boston

Hi guys, just a couple of questions on the core license side, you mentioned potentially having pulled forward in the first half of this year and people are doing their implementation now, do you think that is the only driver here or…you mentioned a lot of new products, is there any sort of distraction in the sales force or the channel focused on selling these new products and maybe not so much just the core business? And if that is the case, sort of how are you managing all these product releases and putting them in the current sales force but also into the channel?

Mark B. Templeton, CEO, President

Yes Phil. First of all, on the XP sort of dynamic there, I think David really stated exactly what the analytics show and that is basically an acceleration of purchases, and now they’re being absorbed by customers and partners by the way, because remember a partner who takes $100,000 order for our app virtualization technology is happy to take an XP order in the first quarter of this year if they were to take a PS4 order, and the implantation services that go with them are pretty much the same. So, we do think that that’s the driving f actor in the SKEW of Presentation Server revenue. Secondly, there’s no doubt that we’ve introduced a lot of new products into not only our field teams, into our channel partners, our VADs, etc., and we’re pushing hard. So, within particular product spaces I think we are getting a little bit of distraction and that’s why when you step back from a specific product line and look at product license growth of 17% on an overall basis that is what really matters here in the grander scheme of things. Not to say that we can’t do a better job of ramping up our field teams and our partners and making them more confident, increasing their capacity and capability, but along the way as we introduce these products we obviously have to get ourselves in the kind of strategic position we know is important for the future.

Phil Winslow, Credit Suisse First Boston

Great, and also if you could just comment just on deal size, if there was any sort of difference that you saw in larger deals and sort of how were large deals this quarter, what does the pipeline look like versus the more smaller transactions?

David J. Henshall, Senior Vice President and CFO

Sure Phil, this is David, let me take that question. For the large deals there were about three individual transactions that were in the seven figure range and there were another half a dozen customers that aggregated up to $1 million during the quarter. So, nothing terribly significant versus the last couple of quarters. We continue to think that the third and fourth quarters are where we tend to see a little higher concentration of large deals, so I would expect it to be in this range, maybe a few more for the fourth period.

Phil Winslow, Credit Suisse First Boston

Great, thanks.

Operator

Your next question comes from Kirk Materne with Banc of America Securities.

Kirk Materne, Banc of America

Thanks very much, you beat a dead horse on the license number around the core business, but can you guys give us an understanding that the comps in the fourth quarter and the first quarter due to some of the pull forward are going to SKEW the overall growth rate? Could you give us an idea just what you think that business can grow at longer term, is this is a business we should be expecting to be in the low single digits at least until we get better sense on some of the new add-on features you’re planning for?

David J. Henshall, Senior Vice President and CFO

Kirk, this is David. Yeah, I think that’s consistent with what we’ve said many, many times in the past and we continue to think that the Presentation Server business is a low-to-mid single digit growth business, and obviously the incremental investments we’re making there to broaden the applicability of the solution which will enhance penetration down the road to increase ROI and to bring forward new solutions around some of the dimensions that Mark referred to in his comments that we think those are the things that allow us to continue to grow this business and possibly even grow it faster into the future.

Mark B. Templeton, CEO, President

Kirk, I just like to add that this low-to-mid single digit number is about sort of new license growth and that as an overall business Presentation Server and the app virtualization products that it supports in our portfolio is a mid-teens kind of growth business, which I think is tremendous in terms of size and in terms of velocity kind of result. At the same time, we do understand that because of the XP acceleration and purchases that we saw in some prior periods here that the comps will be pretty tough in the first two quarters of next year and even in the fourth quarter, because in the fourth quarter of ’05 the EMEA team began to implement the end of sales process. So that’s why we’re going to need to keep our eye on the ball here around overall product license growth and make sure that we’re doing all the right things to stimulate demand and also position the app virtualization products in the market properly because if you again step back and looking forward if I look at the value proposition of app virtualization, which is around security, security of apps, and security of the data that they managed, the performance of applications over networks and the level of access control and the cost profile of actually delivering them, that value proposition gets more valuable going forward in a world that’s trying to globalize and virtualize and…it just gets more valuable. So we have to do the right things there in the product line even though the comps are going to be a little bit tough.

Kirk Materne, Banc of America

Okay, then just one followup question on NetScaler, could you talk a little bit about the success you’re seeing there, is that more in with the smaller deals in the channel or at the high end, and I guess could you juxtapose maybe the success you’re having in U.S. versus what you’re seeing in EMEA? Thanks.

Mark B. Templeton, CEO, President

Well, I think we’ve continued to see lots of velocity in the E-commerce and media metrics markets as we mentioned, and all the top sized deals are going to come from that segment, and there’s nothing new there about that. That will account for about half of the business. The other half of the business is in the enterprise web app delivery business, and that is going to range in terms of size from the bottom end of the product series and customers can get into the product for let’s say $30,000 type range all the way up to transactions that are going to be $100,000. So you see a lot more of those in terms of frequency in that part of the business. In terms of geographic mix, somewhere around 85% of the business is North America and about 15% in EMEA with just a small amount starting off in Asia as we’ve taken on a couple of distributors and hired a couple of key people there. So, the theme here for 2007, especially within our application networking business, will be to not only strengthen the U.S. field team and partners but to begin to roll out the same kind of training education and demand generation programs in EMEA and the Pacific that we had focused on in North America this year.

Kirk Materne, Banc of America

Thank you.

Operator

Your next question comes from Sarah Friar with Goldman Sachs.

Sarah Friar, Goldman Sachs

Good afternoon guys. Just going back to PS4 and that penetration of the installed base, can you give us a sense of how far along PS4 is in terms of penetration right now?

Mark B. Templeton, CEO, President

Sarah, that’s one of the toughest in the world to answer because it’s all based upon your view on what the total available market is. So, what we’ve done is stayed consistent around how we look at this, the analysis on this. So, the first piece is we assume that the total available market within any customer does not exceed 50% of the PCs they have in the corporation. So, if we get 50% of the PCs that’s 100% penetration by our estimates. Then what we do is we have sort of an index here that we look at a broad range of customer types and try to monitor them on an annual basis. So, if you take those two assumptions and processes and put them together, you get somewhere between 12% and 15% penetration.

Sarah Friar, Goldman Sachs

Okay, so there should still be some tailwind from that?

Mark B. Templeton, CEO, President

Absolutely and we’ve got a few cards up our sleeves here that we’re excited about exposing next week.

Sarah Friar, Goldman Sachs

Okay, then kind of part of that, you’ve continued to show great growth on the license update side and I know some of that was to do to people getting current as they wanted to make that shipped to PS4, what was the impact on sort of getCurrent in the quarter, and again do you think we can continue to see 20% type growth on the license update side?

David J. Henshall, Senior Vice President and CFO

Sure, if you look at getCurrent during the quarter and for those of you aren’t really familiar, getCurrent is a program name that allows our customers that are not on current subscription to either renew their old subscription by paying a certain penalty or essentially buy what is an upgrade license equivalent. So, we have the equivalent benefit in the third quarter that we saw in the second quarter from the overall getCurrent programs, but I think the real opportunity is if you look at the overall installed base of products and especially those customers that on the 1.8 or XP platforms, the broadest number is probably 7-8 million of those customers that are not current on subscription right now, and that’s the real opportunity pool to really go and attack with these programs, especially now that the products are end of life. So I think there are still a lot of legs in it going forward.

Sarah Friar, Goldman Sachs

Okay, one very quick one for you. You made the comment as you talked about ’07 model of fast growth for application networking, and I think in the past maybe you’ve talked about a 40% year-over-year growth number; I mean now that you’re adding in the WANScaler product into that, can you give us any sense of what you deem fast growth given that it’s growing 100% plus at the moment.

David J. Henshall, Senior Vice President and CFO

Not yet Sarah. Honestly we’re in the process of finalizing our 2007 internal plans as we speak and are through those models right now. As normal we’ll provide a lot more commentary after the fourth quarter for the 2007 outlook. Right now, as you’ve seen in the numbers certainly this quarter and the prior quarters that business and that team continues to execute really well and we’re very happy with certainly the traction and the market share they’re taking there.

Sarah Friar, Goldman Sachs

Terrific, thanks a lot.

Operator

Your next question comes from the line of Adam Holt with JP Morgan.

Adam Holt, J.P. Morgan Securities

Good afternoon. I also had a couple of questions about the guidance for the fourth quarter and the preliminary outlook for ’07. But first on the fourth quarter, given your commentary about the license revenue number in the third quarter, it actually looks like you took up the yearly number in aggregate revenue and guided ahead of consensus for the fourth quarter. Presuming that Presentation Server is going to be flattish, is that delta a bigger contribution from Orbital on acceleration and application networking and how do you get comfortable with that coverage ratio, etc., are better for the fourth quarter than they were for the third quarter?

David J. Henshall, Senior Vice President and CFO

Let me take the first part of that question and I’ll ask Mark to add some commentary. Overall, like I said previously, I think right now the expectation is for the app virtualization business to be flattish on a year-over-year basis, albeit it up pretty material on a sequential basis. I think that we certainly expect to see continued traction in the application networking side of the house. It won’t continue to grow at the 100% rate but certainly continue to grow faster than the overall markets. We do a lot of work around pipeline management, deal channel, etc., and some of that work is what we’ve been discussing when we’re authorizing new partners and putting them through training, and everything we need to continue to execute this business and fill the pipe. So, we feel pretty good about that going into the fourth quarter. We think it’s a huge opportunity for us, and it’s really just an execution statement at this point in time. Specific to Orbital, consistent with our prior comments, we’d expect that to contribute up about $1.5 million or so for WAN optimization in the fourth quarter.

Mark B. Templeton, CEO, President

Adam, the only thing that I’d add is that we had a fantastic fourth quarter last year and it was helped by some of the end of sale business in EMEA on XP. When we look at the opportunity pipeline both in new opportunity creation and in the coverage ratio that we’re looking at for the quarter, it’s strong as it has ever been. So, these are the things that we look at to form our own opinions around the visibility of the business and the confidence that we have in doing some of the spending that we do in fourth quarter that benefits future quarters. So, as I mentioned in some of my comments, we don’t see anything in what we’ve seen in the XP cycle here that causes us to question anything in the fundamentals of the business, the demand profile in the market place feels very comfortable about our ability to execute.

Adam Holt, J.P. Morgan Securities

And if I could turn for a minute to the out year, it sounds like you’re not prepared to give detailed revenue gross targets around particular sort of product areas, but the two things that you called out in terms of the gross margin particularly it looked like they’ve put negative pressure on earnings. I was hoping maybe you could talk about what some of the offsets are if you’re prepared to maybe give us a general range around revenue growth for next year, and should we expect to see operating margins up next year versus this year?

Mark B. Templeton, CEO, President

Adam, we’d like to talk more about ’07 but we still require all sharp objects and guns to be checked outside the conference rooms while we’re meeting on the ’07 plan right now. So that’s kind of where we are on it and I think that David kind of gave you the parameters. No change in our financial model and what we’re doing there in terms of driving top line growth in this mid-to-upper 20% range in operating margins, which we think is exactly the right thing to do for the near and medium term health of the business and to get ourselves further positioned to be benefitting from the kind of business change that are all positives for our business over the next five years. So that’s kind of the way we’re looking at it.

Adam Holt, J.P. Morgan Securities

Just a last question, you’ve said historically that given the WANScaler ramp into the channel beginning in the first quarter of next year and people continuing to come online are on NetScaler that is much as 30% A&G network, business could come from your distribution network next year, is that still the right target that we should be thinking about?

Mark B. Templeton, CEO, President

Yeah, I think that’s in the right range Adam. Obviously, we’re feeling good about where we are in the app networking business. I think we’ve gone from pretty much zero to about $100 million business there in about 12 months, and that’s compared to others that are pure networking players, and I think those are pretty darn good results for being in the business a little over 12 months now, maybe 15 months.

Adam Holt, J.P. Morgan Securities

Terrific, thank you.

Operator

Your next question comes from Todd Raker with Deutsche Bank.

Todd Raker, Deutsche Bank Securities

One question for David and one for Mark. David, just on effect, can you quantify any impact on the revenue or bottom line from foreign exchange?

David J. Henshall, Senior Vice President and CFO

Nothing material really on either line, we sell primarily in U.S. dollars around the world, so any movement in currency is really not going to affect us on that side. We do see a little bit of pressure on the operating expense, but we hedge out pretty far in advance. It’s slightly negative but nothing material.

Todd Raker, Deutsche Bank Securities

And then for Mark, can you just talk about Project Tarpon and how you see it playing against kind of Microsoft’s internal initiatives on virtualization; you know Microsoft made some announcements around the virtual hard disk, gave its format yesterday, and are clearly telling Softricity there’s a very low price point for application virtualization, where do you guys really fit into the Microsoft strategy long term there?

Mark B. Templeton, CEO, President

Well, we continue to believe in partnering in a synergistic kind of way. So, we don’t have anything to announce today but we’re going to be focused on technology compatibility making sure that our product coexist and work well together, and we’re talking about a range of possibilities there and I think our teams that are actually engaged in the direct discussion are optimistic about getting that done. So that’s the first piece. The second piece is our focus for Tarpon is quite different from Microsoft’s focus for Softricity. So, we’ll make sure that our products are compatible with the products that Microsoft is offering through both their subscription advantage program and off-the-shelf as a product. And then we’ll offer our Tarpon application streaming products in places where they’re synergistic with our overall app delivery infrastructure in terms of adding value like Presentation Server for example, in markets where customers are looking for simpler, easier, faster to deploy kinds of systems, in the small and medium business sector, and then obviously we have opportunities across the board with other electronic software distribution players that want to partner with us with their technology. So, we’re looking at sort of that broad spectrum and feel good about both partnering with Microsoft and being a little bit in the coaptation kind of mode.

Todd Raker, Deutsche Bank Securities

Okay, thanks guys.

Operator

Your next question comes from Katherine Egbert with Jefferies and Company.

Katherine Egbert, Jefferies & Co

What did you say the contribution of NetScaler was in the quarter?

David J. Henshall, Senior Vice President and CFO

I said that the overall A&G business was approaching $30 million in the quarter.

Katherine Egbert, Jefferies & Co

Right, I think you said $6 million was maintenance, I was wondering if you broke out Orbital Data versus the other products?

David J. Henshall, Senior Vice President and CFO

No, we didn’t break out Orbital, but Orbital was about $0.5 million in the quarter consistent with our guidance when we did the acquisition.

Katherine Egbert, Jefferies & Co

Okay fair enough. Can you talk about R&D and G&A expenses in December, they’re obviously spiked because of the acquisition, is this a normalized runrate or do we see them go back down?

David J. Henshall, Senior Vice President and CFO

I think what you should expect certainly on the sales and marketing line is that there is obviously seasonality in that as bookings continue to grow and expect those to be up in the fourth quarter. But also, those are the two areas where we’re really focusing our investments really over the last quarter and certainly over the next few quarters. It’s going to be about building out the product portfolio, integrating the products we’ve got, and really doing what we can to continue to take share in all these markets, and that will include some sales and services investment as well. But I think the way to think about it would be modestly up on both lines and over the longer term you should see probably more on a percent of revenue basis, you know starting to see more coming from R&D as we really invest for the future. I mean the investments we’re making right now certainly around Orbital and some of the newer products are what we expect to begin paying dividends really in the second half of next year.

Katherine Egbert, Jefferies & Co

Okay, and then with respect to 2007, anything on the mix, will it be similar to what it was this year?

David J. Henshall, Senior Vice President and CFO

I’m not in a position to talk too much about 2007 as we’ve said a couple of times and we’re still working through our internal plans as we speak, and this far out we’ve never really been in a position to talk about ’07 yet. So, next quarter we’ll give a lot more granular guidance not only the first quarter of ’07 but certainly for the full year.

Katherine Egbert, Jefferies & Co

Okay, thanks.

Operator

Your next question comes from Brent Williams with Hapoalim Securities.

Brent Williams, Hapoalim Securities

What kind of growth in the field products specialist that you mentioned, can you quantify that a little bit for NetScaler, you alluded to that earlier I think in David’s remarks?

Mark B. Templeton, CEO, President

So, I think our comments there are more prospective than retrospective in terms of where we’re actually spending on developing the GoTo market machinery that both David and I talked about. So, we’ve obviously had some puts and takes and some growth in that team primarily in North America, and the key part of our ’07 plan will be to not only grow the North American team but also begin to do a lot more in EMEA that we’ve been doing. Because remember pretty much every acquisition we’ve done has had really very little EMEA business or presence, and that’s a from scratch kind of project in terms of hiring and ramping and training and setting up distributions, etc., it’s highly expensive and we’d like to do a lot more than we’ve been doing frankly. We’re investing all we think is prudent given the overall picture.

Brent Williams, Hapoalim Securities

Okay, thank you.

Operator

Your next question comes from Dino Diana with UBS Securities.

Dino Diana, UBS Investment Research

I’m just trying to reconcile, you mentioned low single digit Presentation Server growth, still expect it, but you also mentioned mid-teen total Presentation Server growth when you factor in maintenance, can you just help me understand would the maintenance revenue actually be accelerating year over year in ’07 from ’06?

David J. Henshall, Senior Vice President and CFO

We weren’t talking about ’07 at this point in time and we’re really focused on what to expect for the balance of 2006. I think the commentary around next year is really just on the few line items that we talked about. I will say that overall you really do need to look at that segment of the business combined, because now that we’ve moved a vast majority of our customers to more of a subscription type model, I mean that’s where you’re going to see a lot of the revenue recognized over a period of time. And that part of the business will certainly continue to grow faster than license revenue for some period of time.

Dino Diana, UBS Investment Research

Just to clarify, the low mid single digit you gave was for Presentation Server, just license revenues right?

David J. Henshall, Senior Vice President and CFO

That’s correct.

Dino Diana, UBS Investment Research

Okay, and Mark did mention mid-teens in total with maintenance, so the only thing left is maintenance. For that to hold true, you’d have to have an acceleration in maintenance, I’m just trying to understand, is there any reason why inherently that could happen, is it because you’re adding new products that you’re bolting on, could maintenance actually accelerate?

David J. Henshall, Senior Vice President and CFO

Right now the product licenses are growing somewhere around 20% or so year-over-year, and I think that’s a pretty good range to be somewhere in the 15% to 20% range going forward. That number is going to continue to get larger and larger as time goes by, certainly as we a) sell new licenses, get more people on subscription, b) do what we can to continue to increase renewal rate, and c) work towards recapturing some of those 5, 6 or 7 million licenses that are active but not on subscription right now. So, I think what you should expect is renewal rates will continue to be in this 80% range and we’ll do everything we can to continue to drive them towards our longer term targets, which are higher than that, and working getCurrent to keep that part of that business growing. So, at this point just now giving much more granular guidance around ’07.

Dino Diana, UBS Investment Research

Thanks.

Operator

Your next question comes from Manuel Recarey with Kaufman Brothers.

Manuel Recarey, Kaufman Brothers

Thank you. First on application networking, can you talk a little bit about the competitive environment, you had Cisco in early September announced their wide area application services, looks like Juniper is going to introduce some new products and straighten out the acquisitions they made a year ago. So, talk how Citrix kind of fits into the competitive environment and how you differentiate yourself?

Mark B. Templeton, CEO, President

First of all from an overall perspective, we don’t believe that the competitive dynamics in the application networking market, which is web app delivery, SSL gateway, and WAN optimization, have changed in any dramatic way. Cisco has always had a core strategy that they’ve been executing on and every market they go into they get a significant chunk of that market place. I don’t think that any announcements they’ve made or moves they’ve made are significantly changing that. If anything, they’re stimulating overall primary market growth, which is a good thing for everyone. And I think that this applies to a lot of the traditional networking vendors that have relationships with networking buyers but don’t have an application sort of centric view and approach in talking to customers, positioning products, and how all of those products tie into the upper layers of the stack, which is exactly what we are great at doing. So that’s where we differentiate ourselves by really talking about application delivery over networks at the higher layers and leveraging all of the traditional networking here as transport. I think we’re making great inroads in the SSL market place, we’re gaining some momentum in the web app delivery space with the same kind of strategy, and we’ll see if we can do the same thing in the WAN optimization space which we’re optimistic about. So that’s how we’re approaching it.

Manuel Recarey, Kaufman Brothers

One detailed question, I think the services part of that was about $6 million in the quarter, did I hear that correctly?

David J. Henshall, Senior Vice President and CFO

About 5’ish.

Manuel Recarey, Kaufman Brothers

Okay, thank you.

Operator

Your next question comes from Jason Kraft with SFG.

Jason Kraft, Susquehanna Financial Group

Thanks, just real quick to confirm, you mentioned three deals over $1 million, is that correct?

David J. Henshall, Senior Vice President and CFO

That’s correct.

Jason Kraft, Susquehanna Financial Group

Were those three all Presentation Server or where there any that were NetScaler?

David J. Henshall, Senior Vice President and CFO

Those were Presentation Server or suite, I think the NetScaler transactions are generally the ones that aggregate up to $1 million. So when I refer to those, those are usually NetScaler customers.

Jason Kraft, Susquehanna Financial Group

Okay, as a percentage of total license, you guys have done a good job in the queues of disclosing what percentage total license was for Presentation Server as well as what percentage of total license was Access suite, can you give those percentage breakdowns?

David J. Henshall, Senior Vice President and CFO

Yeah, honestly we really don’t look at the business that much internally, but just in a ballpark a little over 10% to 11% of the app virtualization business was the suite.

Jason Kraft, Susquehanna Financial Group

Okay 10% or 11% of total?

David J. Henshall, Senior Vice President and CFO

Yeah.

Jason Kraft, Susquehanna Financial Group

And then just to circle back on getCurrent, what was the total revenue this quarter in getCurrent and what was attributable for license?

David J. Henshall, Senior Vice President and CFO

I don’t have the breakdown what was the attributable license, but you’ve got to think about the various components. So north of $10 million was the bookings for getCurrent, and the way that gets recognized is some of portion of it goes into deferred depending on whether it’s greater than a year, probably 25% to 30% goes into deferred. If it’s less than a year the vast majority either goes into deferred or into recognized license update. So not a huge contribution to actual core licenses.

Jason Kraft, Susquehanna Financial Group

Please correct me if I’m wrong here, but if you’re looking to capture maybe 100,000 licenses a quarter in getCurrent given that they’re still north of 1.5 million out there, so the tail is pretty long. But if getCurrent is priced let’s say $225 a license, suites priced at probably $125, split that 50/50 license to maintenance, even at 100,000 licenses that you capture, it’s $62, and that’s 6.2 million of license that could be put on the PNL. Am I wrong there, it seems like you guys can get anywhere from kind of mid single digit in license to help with at least with the flattish to kind of mid single digit growth.

David J. Henshall, Senior Vice President and CFO

I agree with you, I think it’s a great opportunity right now and we are obviously working through program and initiatives to look back at those customers that are on XP or maybe some of them are still on 1.8 and get those guys current on the more recent platforms, not only for our benefit financially but just for the immediate benefit that the customer is going to see in total ROI performance of the system.

Jason Kraft, Susquehanna Financial Group

Which kind of confirms if you did north of $10 million in getCurrent, it seems like the license portion would at least have to be $5 million, which gives you a nice cushion there, but is that kind of logic the way that getCurrent is priced and the way it’s allocated license to maintenance, I mean am I in the ballpark there?

David J. Henshall, Senior Vice President and CFO

No, actually you’re not, because the majority of the getCurrent this quarter was coming from those that had lasted less than a year, and so in that case you wouldn’t see any benefit going to license revenue. It’s the minority that is always going to blast more than a year in this period. So I think the contribution to total license was no more than $1 or $2 million at tops.

Jason Kraft, Susquehanna Financial Group

Okay, thanks.

Operator

Your next question comes from Ed Maguire with Merrill Lynch.

Ed Maguire, Merrill Lynch

Good afternoon. You’ve talked about channel overlap with NetScaler, have you done a similar analysis on potential overlap for some of the competitive products to Orbital?

Mark B. Templeton, CEO, President

Ed, we have not. Emotionally though we have had partnerships to start with Packeteer and expand networks which provides some of the capabilities that WANScaler does. So, the overlap there with our value added distributors as well as some significant number of integration partners would probably be substantial. So we think that there’s actually some really good knowledge in our channel network around WAN optimization and points of view on that, and we’ve got to bring our product to their attention and show them kind of how it compares and so forth and position ourselves well. So, I wish I could tell you partner by partner what the overlap is.

Ed Maguire, Merrill Lynch

And back to the Presentation Server business, if you look forward to next year with Longhorn Server and Vista, potentially you’re driving some platform migration activity, kind of across a lot of your customers, I mean what are doing essentially to kind of plan for potential disruption there, and I guess sort of more longer term how much of an opportunity is this potentially for Citrix to kind of go back to those still non-upgraded 1.8 next P customers and drive the additional cycle there?

Mark B. Templeton, CEO, President

Well I think the desktop and server cycles are actually different. On the desktop side my opinion is that first of all Vista…I’ve got Vista on my Thinkpad and I can tell you it’s a better Thinkpad with Vista than it was with XP on it, and I think a lot of people are going to realize that despite all of the hub-hub around Vista that you read about, and I think that’s going to drive the big cycle there. At the same time, I think a lot of customers are going to be in lots of pain trying to be sure that applications are going to run in the Vista environment, and I think that’s where our opportunity is and I think that’s the classical opportunity that we’ve seen every time Microsoft moves us forward on the Windows on the desktop side. We see that as a net opportunity as we always have experienced. On the server side I think the dynamics are different. I think that Longhorn Server is going to be the best Windows server in history, it’s got tremendous new capabilities, but I think that customers are going to do a lot of testing and it’s going to be a slower burn on the uptake side, and I think as a result products that are going to rely on migrations of the server operating system could struggle during the few quarters out when Longhorn Server is first introduced, and that’s at the enterprise level. In the small and medium sort of the end of the market place, we are believing that when it’s available that’s where customers will go and we’ll be ready with products to deliver in conjunction with Microsoft’s release, so that’s our game plan.

Ed Maguire, Merrill Lynch

Okay thanks.

Operator

Your next question comes from Rob Owens with Pacific-Crest Securities.

Rob Owens, Pacific-Crest Securities

Hi, good afternoon. You gave us a metric I think that half of your business around NetScaler was E-commerce or medium metrics related and half was enterprise related, can you give us a sense of where that’s tracked over the last few quarters and as we look ahead where you’d hope that ratio to go?

Mark B. Templeton, CEO, President

Actually I think it’s been pretty steady around that, which is actually a good thing because the growth on the media metric side has been great, so our ability to kind of keep up with that on the enterprise side is pretty impressive. Obviously the size of the transactions and the frequency is very different as I mentioned earlier. So, that’s what we’ve seen over the last few quarters.

Rob Owens, Pacific-Crest Securities

And can you give us a sense on the Citrix Online piece, what was the incremental contribution from GoToWebinar this quarter or what we should look for in the fourth quarter?

David J. Henshall, Senior Vice President and CFO

No, I think the way to think about is really as part of the GoToMeeting family, I mean that’s really the way the products are being sold and utilized to a large extent. So we’re not going to be breaking that out much, because I don’t think it provides a meaningful metric, but it’s certainly off to a great start. Mark talked a lot about the metrics around minutes and meetings, etc., and now that we’ve got the growth in that overall product line growing over 200%, right now it’s a matter of how much we can invest to continue to take share in that space.

Rob Owens, Pacific-Crest Securities

Great, thank you.

Operator

Our last question comes from Walter Pritchard with Cowen and Company.

Walter Pritchard, Cowen & Company

Thanks, just one last question, you talked about your plans on A&G and taking that into Europe and Asia next year, and what you didn’t talk about is your plans on taking the Online business into international territories which I believe you’re just still in the U.S., I’m wondering if you have anything to talk about there?

Mark B. Templeton, CEO, President

Yes, we’re actually already in the process of taking the online business in a more than opportunistic way, which is where we’ve been in EMEA. So, we’ve hired a leader there that we like a lot and we’re starting the process of investing on both the inside sales side as well as the online demand generation side, so we’ve seen that these two sort of GoTo market methods actually work very much hand in hand when we’re selling our online products, so expect that to be part of our growth model for 2007 entering EMEA with our online services.

Walter Pritchard, Cowen & Company

Last question on this end of life dynamic you talked about. I guess my sense is you maybe didn’t realize how big of an issue this was on the positive side in the fourth quarter and the first quarter, was there some survey of the customer base you did or some deeper analytic dive you did into the numbers here more recently that sort of shed light on the driver here?

Mark B. Templeton, CEO, President

Yeah, Walter, when the numbers are actually in the whole scheme of things, this small, it’s hard to see the trends and prospectively from an analytics perspective. But, when you look at them retrospectively, especially in context of a current quarter, you can see the acceleration and then across various geos; EMEA for example began implementing versus when Pacific and North America did. So, we’re a great user and we’ve just begun to roll out the usage of it, and that’s shed actually a light on where the acceleration occurred and gave us a lot of insight on that.

Walter Pritchard, Cowen & Company

Great, thanks a lot guys.

Operator

Ladies and gentlemen, we have reached the end of the allotted time for questions and answers. I will now turn the call back over to management for closing comments.

Mark B. Templeton, CEO, President

Thank you again for joining the call today and I appreciate the good questions, and we’ll see you in three months.

Operator

Thank you for participating in today’s Citrix conference call, you may now disconnect.

TRANSCRIPT SPONSOR

Research2Zero Logo

Research 2.0 combines in-depth, theme-oriented technology investment research with a lightweight business model. Our approach is to concentrate our research energy and resources into areas not well-covered by existing firms. While other analysts are attending informational meetings with company managements, we are talking to customers. While other analysts are spending a huge chunk of their time each quarter on earnings releases we are doing hands on work with technology. While other analysts are focused on what amount to trading perspectives, we are working on long-term underlying trends that drive revenue, margins and long-term company valuation.

Because we leverage technology and new distribution models rather than traditional high-cost infrastructure, we can provide unique research in a much more cost effective manner.

Individuals can purchase an annual subscription, corporations and institutions can become sponsors or consulting clients. We also deliver a good deal of our content at no charge via our email list, blog, free publications and summaries of our other research reports.

To sponsor a Seeking Alpha transcript click here.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!