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Citrix Systems, Inc. (NASDAQ:CTXS)

Q1 2008 Earnings Call

April 23, 2008 4:45 pm ET

Executives

Eduardo Fleites - Director of Investor Relations

Mark Templeton - President and Chief Executive Officer

David Henshall - Senior Vice President and Chief Financial Officer

Analysts

Todd Raker - Deutsche Bank

Phil Winslow - Credit Suisse

Michael Turits

Abhey Lamba - UBS

Sarah Fier - Goldman Sachs

Bhavan Suri - William Blair

Steve Ashley - Robert Baird

[Eric Schwartz] - J.P. Morgan

Katherine Egbert - Jefferies

Kirk Materne - BOA Security

Israel Hernandez - Lehman Brothers

Walter Parkes - Cohen & Company

Robert Breza - RBC Capital Markets

Richard Sherman - MKM Partners

Daniel Ives - Friedman Billings

Manny Recarey - Kaufmann Brothers

Brent Williams - Benchmark Company

Operator

Good afternoon. My name is Jennifer and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Citrix Systems First Quarter 2008 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. (Operator Instructions). Thank you.

I would now like to introduce Mr. Eduardo Fleites, Director of Investor Relations. Mr. Fleites, you may begin your conference.

Eduardo Fleites - Director of Investor Relations

Thank you, Jennifer. Good afternoon everyone and thank you for joining us for today’s call where we will be discussing Citrix’s first quarter 2008 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 System’s Investor Relations website and the slide presentation associated with the webcast will be posted immediately following the call.

Before we begin the review of the financial results, I want to state that we have posted product classification and historical revenue trends related to our four product groupings to the Investor Relations page of our website.

As we get started, I want to emphasize that some of the information discussed on this call may be characterized as forward-looking statements made pursuant to the Safe Harbor Provisions of the US Securities Laws.

These statements involve a number of factors that could cause actual results to differ materially from the statements made today including risks associated with the company’s businesses, general economic conditions, the company’s revenue growth, the company’s products, and the demand for our products, the development and distribution, competitive factors, the company’s key strategic relationships, the effect of new accounting pronouncements on revenue and expense recognition including the effects of FAS (123)R on certain of the Company’s GAAP financial measures, acquisitions and related integration risks.

Additional information concerning these factors is highlighted in today’s press release and in the company’s filings with the SEC including the Risks Factor disclosure contained in our most recent annual report on Form 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 the Securities and Exchange Commission's Regulation G, which include adjusted operating expenses, gross and operating margin, operating and net income and earnings per share. The most directly comparable GAAP financial measures and a reconciliation of the differences between the non-GAAP financial measures discussed on today’s call and the most directly comparable GAAP financial measures can be found at the end of our press release dated today and on the investors relations page of our website.

Now, I would like to turn it over to David Henshall, our Chief Financial Officer. David?

David Henshall - Senior Vice President and Chief Financial Officer

Thank you, Eduardo, and welcome to everyone joining us this afternoon. Today Citrix reports another solid quarter of revenue growth. Our app virtualization business up 19% over the last year is continuing the momentum from 2007. Our online services had a great quarter, up 31%. Our app networking business was up 17% and we made tremendous progress building the foundation of two high potential businesses in desktop and server virtualization.

From a geographic perspective, our international businesses continue to execute extremely well, growing about 30%, offsetting a couple of pockets of weakness that developed in the US during the quarter. Our focus in investment in building a more global footprint, product line breadth and business model diversity is serving us well in spite of the economic headwinds in the US.

Turning to the numbers. In total, we reported quarterly revenue of $377 million, up 22% over the last year. Product license revenue in the quarter was 147 million, a 20% increase, adjusted EPS of $0.45 and the adjusted operating margin was 20%. So overall, solid numbers for the quarter.

Now, I’m going to provide more detail on our results by region and product area. As I mentioned, performance by geography was varied during Q1. Europe, Middle East and Africa revenue was 127 million, growing 31%, while revenue in the Pacific geo was 31 million, up 28% year-on-year. Since we price in US dollars globally, these results are on a constant currency basis.

The performance here also demonstrates a return on many of the go-to-market investments that we have made in these markets over the last year. The Americas business was mixed in Q1 with revenue increasing 13% year-over-year to 157 million. Within the US, it appears that economic concerns are causing some customers to be a bit more cautious especially with the smaller recurring transactions typically seen in small to mid-size customers. I expect this revenue to be less predictable for a while leaving us to be a little more cautious in our US forecast.

Next, I would like to review certain product areas and the trends in those businesses. First, our app virtualization group grew 19% year-over-year to 268 million with license revenue increasing over 20%. The key driver in Q1 was a continued success of XenApp Platinum, which contributed 28% of total app virtualization license revenue.

As we have seen in prior quarters, Platinum licenses are driving increased ASPs in average deal size for new customers in this business. In Q1, there were three XenApp Platinum deals greater than $1 million, demonstrating a strategic value that customers are seeing with this solution. Looking forward, we believe that XenApp Platinum could contribute upwards of a third of all new app virtualization license revenue for the full year and customers are also renewing subscription advanced contracts for XenApp at consistent levels in the mid 80s percent range, which helped increased deferred revenue by over $18 million during the period.

The second product area is our app networking business. Total revenue in this group was 38 million, an increased of 17% year over year. As we discussed in prior quarters, we’ve been increasing our capacity to service customers and enterprise accounts particularly in international markets, which showed strong growth in Q1.

In fact, the number of new enterprise accounts in the ANG business continue to increase sequentially and the Platinum addition of NetScaler, which is targeted towards these customers, contributed about 20% of the group license revenue.

The one area of weakness here was within the US market. We’ve seen scintillating capital spending decisions due to macro concerns. We’ve also witnessed the product cycle pause as customers are looking forward to the delivery of our new NetScaler MPX platform, which is scheduled to ship this quarter.

The last area I’d like to touch on is our business in server and desktop virtualization. In Q1, we recognized 3 million of revenue. The large majority of early business here is being generated through our channel where we now have 24,000 authorized partners. In Q1, we were focused closely on building the go-to market foundation, getting partner certified, trained and preparing for a broader ramp in the second half as we stated in the past. Additionally, our new OEM partners: HP and Dell began shipping their embedded server offerings earlier this month. With the way these arrangements are structured, we can recognize revenue in the third quarter. Mark will provide better details on this business later in the call.

Now, let me talk about expenses and operations in the quarter and some of the items that impacted the Q1 results.

Adjusted operating expenses were 274 million, up 24% year-on-year and 1% sequentially, driving our adjusted op margin 20%. While currency fluctuations are negatively impacting our expenses, the largest increase in cost was due to additions in headcount. We added about 200 people since the beginning of the year and now have 4,850 total employees. Functionally, the largest increases continue to be in the sales and services teams mainly focused on server and desktop virtualization. Our adjusted tax rate in Q1 was 20%. There are few percentage points lower than our forecasted rate as a higher proportion of income was generated in international markets.

Turning to the balance sheet. We currently have 850 million of cash and investments. And within our investment portfolio, we hold 45 million of auction rate securities. While these securities are all AAA rated instruments, we have reclassified them to long-term investments due to the ongoing liquidity issues in this market. We also recognized an impairment charge here during the quarter of 2.1 million.

From operations, we generated 107 million of cash flow in Q1, bringing the 12-month total to over $400 million. Our primary use of cash in the first quarter was for share repurchase. During that period, we received over 4 million shares from open market purchases and other structures and the company now has about 260 million available in the program as we enter the second quarter. So overall, looking at the results, I am pleased with the Q1 financial performance. We will continue to execute against our strategy while delivering solid growth.

Finally, I would like to talk about our current outlook and expectations for the second quarter and the rest of 2008. Before we discuss numbers, let me provide you with some context around our forward outlook. Obviously, we are continuing to see solid demand across many areas of the business. We are also optimistic that our strategy is becoming more mainstream for customers and the investments we’ve made will help strengthen our competitive advantage in the future quarters.

We are unchanged in our position regarding the huge market opportunity in front of us. We will be mindful about the current US economic climate that maybe impacting some of our customers. So in order to be proactive, we are prioritizing some of our investment plans in order to maintain our focus on profitability targets. Additionally, the rapid reduction in market interest rates has caused the return on investment portfolio to decline from our original plan. With rates trending down as rapidly as they have, the impact on investment income could be up to $15 million over the balance of the year. To account for all of these items, we are modestly expanding our 2008 guidance range.

So turning back to the numbers. We currently expect for the second quarter of 2008 total revenue in a range of 380 to $390 million, interest income of 7 to 8 million, and adjusted tax rate of 21 to 23%, an adjusted EPS in the range of $0.35 to $0.38 a share. For the full year 2008, our current outlook is total revenue in the range of 1.6 to $1.645 billion and adjusted EPS in a range of $1.54 to $1.64 per share.

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

Mark Templeton - President and Chief Executive Officer

Thanks a lot, David. I am delighted to report another great quarter of growth and I am really proud of our excellent operational and strategic execution. As David mentioned US market conditions have made us a little conscious, in the short run, balanced spending plans, focusing on those areas where we see the most growth potential, but we won’t lose focus on our goal of offering the world’s most complete set of solutions for application delivery, both premise based and as an online service.

Over the past two months, I have had the pleasure of seeing quite a few customers and partners in the US. Universally, our message is resonating with them, a single architecture that gives them a long-term solution to what matters the most, getting applications to users precisely when and where they are needed.

At the same time, they are clearly squeezing IT budgets. In odd way, tighter IT spending makes our value propositions more visible, more relevant, and even more compelling, allowing us to help customers rethink their strategies for lowering IT costs, enabling a virtual workforce, reducing travel, increasing employee productivity, and getting operationally green. This listening to customers is how Citrix grows.

For 2008, our focus is on execution and investment in five priority areas.

First, strengthening our position in app virtualization by re-launching Presentation Server as the XenApp products family, driving aggressive Platinum edition revenue mix, and leveraging the new Windows Server 2008 platform.

Secondly, increasing our share in enterprise WebApp delivery by improving the capabilities of NetScaler Platinum edition and releasing a next generation platform that really pushes the envelope on scalability and extensibility.

Third, build on the scale of investment we have made in our online virtualization platform to further penetrate the SMB market, to provide innovative new products, to globalize into new geographic markets, and to further simplify our customer experience.

Fourth priority, to build velocity and our go-to-market capacity in both desktop and server virtualization, by ramping our channel and OEM programs throughout 2008, by leveraging our Microsoft partnership, and by introducing XenServer and XenDesktop to our partner network.

And the fifth priority is to really step up the volume of our Citrix Delivery Center message. Citrix Delivery Center, our [Uber] brand to capture all of our product lines in one family. And the message to drive an end-to-end system vision to increase the breath of our partnerships and to improve the cost integration of our product into a system. We are doing well against each of these priorities and next I would like to double pick on each one of it.

Over the past 18 months, we put in place all the elements needed to reposition Presentation Server as core mainstream infrastructure, our system for virtualizing Windows application that separate the application from the Desktop OS, transforming it into an on-demand access. This provides amazing customer value, saving significant time and money for IT, providing powerful information security controls, improving application performance, and making Windows apps much more manageable.

To re-launch Presentation Server, we showed the biggest stage of all, joining Microsoft in over 40 countries and they introduced Windows Server 2008 to millions of customers around the world. We also announced a bold move to rename Presentation Server to Citrix XenApp, joining our XenDesktop and XenServer brands and uniquely positioning Citrix with end-to-end virtualization for apps, desktops, and servers.

Citrix XenApp virtualized Windows applications by separating them from the Desktop OS on both the service side and the client side. In simple terms, this means never having to install apps into the desktop again, dramatically improving the cost, performance and useful life of the PC. XenApp is being seen in a whole new light, but there is lots more to come. We have an exciting innovation pipeline for XenApp that will begin to deliver in the second half including full support for Windows Server 2008.

Next, I would like to talk about our App Networking business. After a bad year of 2007 that saw us gain market share on our key competitors, the growth rate of our app networking business slowed a bit last quarter with partners and customers eagerly anticipating the release of our next generation appliance in Q2, the NetScaler MPX series. We are not ready to fully unveil it here, but let me give you a sneak peak.

NetScaler MPX will be the world’s most powerful line of Web application delivery appliances. MPX features a massively parallel hardware architecture that leverages all the latest advances in Intel multicore technology to deliver unmatched scalability and extensibility.

In addition to setting new performance standards for our largest Internet-centric accounts, NetScaler MPX also represents an exciting new breakthrough for enterprise customers, clocking in at more than double the capacity of the previous generation. NetScaler MPX can deliver twice as many enterprise apps with the same infrastructure footprint, dramatically improving data center efficiency and green computing initiatives.

This advanced processing power also meets the emerging needs of next generation Web apps including XML-based SOA, Web 2.0 apps, and even rich media apps that make heavy use of audio and video. This exciting new release puts us in an ideal position to capitalize on the rapid growth in Web applications and gives us confidence that growth rates in our app networking business will rebound going into second of half of this year.

Next, I will double pick on our online services. The scale out investment we have been making in our online virtualization platform continues to pay off. Our online services division delivered another solid growth quarter driven by great execution and demand across customers of all sizes.

The business was led by one of the fastest growing Web services in the world suffix GoToMeeting to meeting. With revenues of 67% year over year, this product is being driven by market factors such as escalating fuel cost, cuts in travel budgets, and increased telemarketing. In addition, our remote active and support services achieved a 19% year-over-year corporate led by GoToMyPc, which continues as the market leader. The beta version of GoToAssistExpress, our new remote support solution for professionals has been a huge hit.

Following in the footsteps of the ever popular GoToAssistCorporate, which saw 85% session growth year over year. The GoToAssist product family can now meet the needs of any organization from one-to-one interactions in the smallest business to the high volume customer service need to the enterprise. Our real time collaboration products are known to be innovative, easy, fast, and secure focused on exactly the right features and unequalled user experience. Beginning this quarter, we will begin introducing improvements and new products that will raise the war again, so stay tune for this.

Next, let’s move in on our new virtualization opportunities enabled by the Q4 acquisition of XenSource. Q108 was our first full quarter of integrated operations with the XenSource team. As you know, our 2008 plan is to invest in the first half in order to ramp up second half revenue and both desktop and server virtualization markets. We are on track hitting our technical milestones, achieving organizational growth and putting channel and OEM throughout the market in place. I am amazed that how much building we have accomplished in such a short time. XenServer version 4.1 was announced and released in Q1, many customers were waiting for 4.1 to begin evaluations, pilot and competitive takeoffs. This release had over 50 additional features focused on scalability performance, this ability and storage integration. The four one release also included the bill of the OEM embedded addition of XenServer. And last week, we release the Platinum addition of XenServer. It is the first server virtualization product that can dynamically delivery workload to both virtual and physical servers on demand. Bringing the overall value proposition of virtualization to every server in the datacenter. The XenServer growth gets even more exiting from here as we enhance its enterprise capabilities offer -- and our ability with Microsoft’s Hyper V. And continue to work toward their medal workload performance. There is a lot of excitement coming for both customers and partners.

From a channel prospective, we authorize an additional 800 partners during the quarter exiting with 2400 in total. We exceeded our certification goals for both sales and technical specialist adding over 1200 in Q1. Early partners are becoming more active, in fact 60 partners closed deals in both Q4 and Q1. There is being a lot of focus on training along with creating an opportunity pipeline, which is looking good. So I’m pleased with all the channel metrics that I see to this point.

Our partners added over 400 XenServer customers during Q1, 75% were first implementation involving one or two servers really planting seeds for the future. The rest were with customers implementing between 3 to 100 servers, the very early signs of committed implementation and our ability to win in various customer sizes. We are doing this by offering a high performance and a package that’s faster, simpler and lower cost implement. One of our North American partners won a 100 server deal with the well known dotcom customer in Q1.

They are running hundreds of application workloads. The customer was using first generation virtualization looking to upgrade. We won the business by demonstrating XenServer robust future sale, virtual machine profitability and the fast time to implementation. We also won a 50 server deal with an internet service provider, who was running out of datacenter power and space. They have valuated XenServer head to head against other solution including extensive low testing and system overhead analysis. In the end, they chose Xenserver for its bare metal installation without a dedicated host operating system, open interfaces and faster vision in the OEM from their existing storage infrastructure. Wins like these are giving our channel partners the confidence they need to offer the unique quality to XenServer to their customers. So, in short the child metrics was solid, early customers winds are beginning and we are on track. DELL and HP have invaded hyper wiser OEM partners used few one to conduct final testing for product shipments that began this quarter as David mentioned. So the OEM business is front loading process to involving a significant amount of up line awareness and educational initiatives. We already held XEN sort of seminars and training with almost 3000 people of Dell and HP. In this quarter we’ll begin to focus on HP and Dell’s channel partners creating demand for both embedded and add on XenServer solutions. To this flight, we will take a little longer that anticipated to produce revenue but we are confident in its ability to contribute significantly to our market entry and penetration.

Next is the other exciting new virtualization opportunity in the desktop virtualization market, then desktop have end-to-end desktop delivery solution is the most anticipated new product we have ever released. We are delighted with the press coverage, analysts reports and customer commentary that’s been dealt in advance of our large later this quarter. All-in-all we have maintained several points of view on this market.

First the 2008 will primarily be a pilot at the year with significant implementations in 2009. Secondly that successful like our first in providing a user experience that’s equal to or better than in the office workers physical desktop. Third that the economics have to provide a tangible savings to IT, this is even more true with the current economic environment. Fourth the operational scalability has to be we built in from the beginning especially for earlier doctors viewing it, especially for all the doctors. And that a value added partner ecosystem like Citrix ready partners is essential for the complete end-to-end solution for customers. These are our views enlightened by our competency in the user tier of computing by our technically innovations, by the partnerships we built. If I had strategy to reframe VDI in the industry with a strong collaboration partnership with Microsoft.

XenDesktop makes desktop virtualization viable, really for the first time, Xen desktop dynamically assembles a unique personalized desktop, from new pristine components each time the user logs on. And runs it out of powerful data server and provides access from a no making in desktop appliance over our LAN, WAN, or Internet connection. So as a user you feel like you are getting a fast brand new personalized PC every single day so that will imagine that, imagine how that feels.

Six weeks ago we offered a free public data of XenDesktop averaging 1,000 downloads a week. The feedback has been amazing with customers queued up for early stage implementation when it goes to GA. We also have a data program for about a dozen or so select customers. They intend to use on desktop across a broad set of solutions. Here is the few quick examples, there is a large regional healthcare organization that decided to use on desktop to centralize control of hundreds of destktops across a broad pipeline healthcare network Replacing PCs with Desktop appliances from a longtime partner wise. There is media contract provider in the UK that’s providing access to proprietary content and services to their partners and customers who relay on XenDesktop for like being there user experience over a wide variety of network connections. There is an emergency call center that plans to use a Desktop and XenApp together to deliver a Desktop employment that stands 8 displays along with all the applications needed to respond to a public emergency.

And there is a large US financial services firm that’s leveraging the data to deliver virtual Desktop to contract employees in India from their US data center. XenDestop will be released real soon and will have a lot more to set in there at our annual customer event now called Synergy. Citrix Synergy is a brand new global customer event that features spot leadership in virtualization, networking, and App delivery. It incorporates our IT forum event and this year is the first step toward making Synergy an industry conference designed for a broader range of technical and business attendees.

Keynote speakers include senior executives of Microsoft, Intel, HP, and Cisco, as well as industry analysts from Gartner, IDC, and Forrester. We also have Nicholas Card who is groundbreaking best seller, the big switch and visions are coming revolution and computing where every desktop and app will be delivered as an on-demand service.

Citrix will also be making several exciting announcements for Synergy including the official launch of Xen desktop. We welcome you everyone listening on today’s call to visit CitrixSynergy.com and register to join us at this exciting new conference. I guarantee you won’t be disappointed. So now wrapping up, we are enabling IT organizations to operate in a whole new way. Like the provider behind your cable or Satellite entertainment service, with a simple receiver in your home to provide all the on demand services you need. The Citrix delivery centre includes the essential components of that application receiver along with all the matching and then infrastructure. It is system that centralizes its complexity and gives IT control of the most important parts at computing desktop, applications, and data.

And like a service provider, it allows IT to operate with the efficiency, flexibility, and gelidity needed to keep pace with this was changed. The pace of investment in our vision has put Citrix in an amazing position; especially considering the velocity of business changed that will be implemented over the next five years. So, thank you for listening and now I would like to open up for Q&A.

Question-and-Answer Session

Operator

(Operator instruction) Your first question comes from Todd Raker at Deutsche Bank. Your line is now open.

David Henshall

Todd?

Operator

Mr. Raker, your line is now open.

David Henshall

Let’s move to the next questions Jennifer, we see we could get Todd back.

Operator

Okay sir, your next question comes from Phil Winslow from Credit Suisse. Your line is now open.

Phil Winslow

Hi, thanks. Guys just wanted to digging a little bit on presentation where we obviously had continued strength in migration of Platinum, but how should we think about just the linearity or the seasonality of presentations review, if you look back, you know, four, five, or six sort of flourish in several months and then big Q4 from license revenue perspective, just curious what -- how you guys are thinking about that and also in your commentary about seeing some slippage in the S&B business, I wonder if you could just categorize what you are seeing there what are kinds that we think the larger deals portion of small ravel ones?

David Henshall

Sure, Phil, this is David. Let me – let me talk about the linearity first. Obviously, we are really excited about our business and it continues to just get, you know, terrific attraction especially around the Platinum addition, as you know that’s been ahead of our expectations for couple of quarter now running nearly a third of the total within our business, if you look back at last year thinking about linearity number, we had a great second quarter.

We used that as kind of launch of Platinum. We increased prices. We brought whole bunch of new technologies to markets, so I had really good second quarter and then you know strong third and fourth quarters on the back of that. In general, our linearity is you know tracks with the calendar year, you know, we tend to progress throughout the year on a sequential basis and then have a pretty big step up in Q4. I think that you know we should expect for this year as well. As far as growth rates year-over-year, we got a tough time obviously in Q2, but I think that the business you know continues to grow in that mid single digit range on license basis into the second quarter and probably mid-to-high single digit for the full year.

As far as the commentary around the economy, I think it just as you had expect there’s certain customers are being a bit more cautious, you see, I got the more discretionary, you know, small kind of one way type transactions are the ones that would slip out and really no material change to the more strategic large enterprise but we had seven transactions in Q1 that exceeded $1 million, which is – I believe that’s a record for our first quarter, so really going to enterprise just been, you know, mindful and thoughtful of the S&B space right now.

Phil Winslow

Also just very briefly on the wind side, you know, Xen coming below than our estimate, the low end and guidances, curious what trends are saying there, any change on the pricing side anything competitive?

David Henshall

No, Phil nothing, you know, nothing that we having that talked about before in terms of what it takes to put the foundation in place. I think that you know, most of the questions around this that we’ve had over the last three months had been you know, around the lines of, what should we be looking for out the head of the revenue production. And really, it’s kind of metrics that we try to report on today in terms of authorization, certifications, training; pipeline, customer winds, our new customers and count all of those metrics and all of those really amount to the kind of confidence we had and being able to deliver on the game plan that we put forward. So, we really feel good about what we were doing in both desktop and server virtualization spacing.

Phil Winslow

Great, good quarter guys, thanks.

David Henshall

Thank you, Phil.

Operator

Our next question comes from Michael Turits. Your line is now open.

Michael Turits

Hi, guys, Two questions, one first on the NetScaler side, you said that the part of it was hesitation before the new product release but also that the capital budgets particularly in the US, put a little light. You did say you expected that the second half rebound there, I was wondering what’s giving you some confidence beside on that besides the product release? And then the second question is just have to do with presentation survey, it sound like it was on, you said, a smaller transaction kind of stuff fell short but really came through and in the numbers which were very strong in the presentation service side you know where do you pick up that weakness and why don’t then we see in the area?

Mark Templeton

Okay. Michael this is Mark, I will take your next set of question and David will talk about XenApp. On the NetScaler front with, there are couple things going on that David mentioned then you may be I will just provide a little color there. The first of all, we’ve been working on the MPX platform for quite sometime. And had a tremendous amount customers feedback and involvement in that so there has been a lot of visibility with enterprise internet setter customers on this project, and you know as it gets closer to release, you know, there will definitely naturally kind of wait for the availability in the platform and by only you know kind of what they absolutely have to have. So that’s you know one significant dimension of what we saw in Q1, and what we expect to see in Q2 as well because you know the Indians will start to ship around mid quarter and they will be some customers that haven’t had them before and we want a look out them before actually, you are placed to POs. We have received some POs, already for MPX, we are really feeling good and excited about the prospects there. And that you know that will allow them you know both for much better second half based upon the availability and customer experience with MPX.

On the capital spending side it, you know actually its any one guess were kind of feeling like the US going to look like this specially the networking space of all year. And I think that you know if you look at lot of the other networking vendors, you know, they are talking about this and I think when I talk to customers what I hear is for overall networking refreshing network infrastructure is not got to do and a kind of is lower on the stack relative to things like the server virtualization, desktop virtualization you know certain securities spaces etcetera. So I think it will be rougher sliding for every one in this space and for the whole year that’s our expectation.

David Henshall

And Michael regarding XenApp comment I think when we were talking about this small medium business it’s a little bit more of US for phenomenon down to the small kind of discretionary purchases, but that’s you know more than offset with the strength in the enterprise business and we saw a really all geographies and you know right now the you know customers are really moving towards platinum I mean as I mention couple of time we had great success there its driving high areas ASP’s, higher deal sizes, and we expect that trend to be able to continue.

Operator

Your next question comes from Abhey Lamba from UBS. Your line is now open

Abhey Lamba

Yeah, thanks I guess can you talk a little bit about have the movement in currency impacted your cost structure and how should we think about the impact year, of foreign exchange movement, your ability to expand margins in 2009.

David Henshall

Sure, you bet, like all companies right now, you know we are chasing the falling dollar around world. We do price in dollars around the world , so we don’t get any incremental benefit from a translation adjustment on revenue. However, we do hard of the lot of foreign currency denominated expenses. And you know while we do hedge out you know 6 to 9 even 12 months in advance in many cases, you know the rapid decline of the US deals just is putting some awkward pressure on that. You know, we don’t call it out, that is not a huge impact, you know, $2 million or $3 million a quarter, and we just manage the business through that and so, and I will be thinking about in that context but, yeah probably 2 to 3 minor quarter.

Abhey Lamba

And in terms of the virtualization business when will the partners channel fully ramp up and when should we expect to see bigger revenue contributions from them, can you also remainders us your revenue level you are targeting for 2008, and 2009, from that business?

David Henshall

I think you are asking about while this -- we have three virtualization business.

Abhey Lamba

As in Xen business.

Mark Templeton

Okay, the XenServer business.

Abhey Lamba

Yeah.

Mark Templeton

So we talked about metrics and the fun in loading in the prepared comments and then what you would expect is, you know, think about a business that’s doubling or more each quarter through the end of the year and also remember that XenServer is one piece of our virtualization business that is based on the Xen hyper wiser and the other one is in Desktop, so between the two of those products and market segments we believe we can, yeah we are on track to generate the kind of revenue plan that we, you know, stated when we first acquired XenSource back in August of last year. And while you know there had been a lot of changes in the market place. We’ve learned a lot from our partners and customers and so forth, we still feel good about where we are and with it’s a front end and back end story and it’s pretty much such simple.

Abhey Lamba

Thank you.

Operator

Your next question comes from the Sarah Fier from Goldman Sachs. Your line is now open.

Sarah Fier

Good afternoon guys how are you doing. On operating expenses David let me talk a little bit about at the at the Analyst Day you said, as there is a lot of macro had runs and they continue to increase we conduct and impair back a little on this in a need to keep spending. If you want to completely kill that operating margin? Could you talk a little bit about you still feel like you have that flexibility and maybe this scenario that gets you to the $1.54 versus the scenario that get you $1.64, maybe you can add a little bit more color on that?

David Henshall

Sure, you bet Sarah, I think I would actually let me just take a little step back and reiterate some of my comments around guidance because there are a few moving parts here right now, you start with the below the line items first. I mentioned just the market change in interest rates is going to put a lot of pressure on investment income this year now I will show up in the other income line probably $15 million decline over our original plan if you just multiply couple of 100 basis points lower return on investments, good news is with the current shape of the business we’ll be able to have a little bit lower tax rate and we are originally thinking offsetting some of that we’ve also been more aggressive on our share repurchase been able to bring in more shares and keep the share count at a certain levels, so you don’t in that we’ve got to below the line staff impacting us by a few pennies which is move us to really bringing down the EPS number.

As far as the business goes, we believe that, you know, the right tactic right now is really to align our expense profile in our future investments with overseen on the business and we can do that in real time. Our single biggest leverage around head count, you know, we’ve been adding some more between 150 and 250 people per quarter over some period of time and we will tamper that and moderate that for probably more importantly focus that on the areas, that we believe are most strategic and you know, it will facing some Macro headwinds will come back in that area. So we definitely very focused on that I think we got the ability to execute there.

Sarah Fier

Great, and then may be just you gave good color on one of the macro backdrop, but could you give us sense of money already you did it from [Moarse], you got in to the end of March which is both referred from other companies like IBM, EMC, and then any change a momentum in Europe, as went through the quarter.

Mark Templeton

Yes Sarah, it think the you first comments is fair one I think that we didn’t get a big question marks there for the end of the any quarter the years like that and so. I think that’s what originally missing on such emergency on the sense of customers. I would not say it necessary slowed it just didn’t in to accelerate like it normally would. As far as international markets now, I mean they are continuing to do really well both in the MES base as well as Specific there. They are executing quite well. We think it’s prudent not to forecast in them being significantly about the plan the rest of the year however no impact at this point.

Sarah Fier

Great. Thanks very much.

Operator

Our next question comes from Bhavan Suri with William Blair. Your line is now open.

Bhavan Suri

Hi guys good quarter I just had a couple of questions, the first one around XenServer, you know you are saying that Dell and HP are shipping XenServer in better and I guess one of the things I am trying to understand is along the partners between you and competitors is the same. How do you talk to those partners about the XenServer valley proposition versus you know the VMO. How do you convince them that’s an option today where VMO has been in the market sort of longer as you know various pieces around there?

David Henshall

Please stay forward it is a differentiated solution for Server virtualization I think miles different it’s high performance has one of the high performance capabilities but it’s put in a package that much easier to consume much faster to implement supports the customers existing storage infrastructure. It is friendly to the Microsoft up coming release of hyper V etcetera and supports importantly not only the delivery of App work loads to frontal machines but also can deliver workloads to physical machines as well. So its really simple matter of not being of V2 product having a different position, a different value proposition and then the customer gets to side and the best way to work with partners is put them in the position where they can offer customer a choice and recommended the direction based upon what the customer specific needs or that’s the role that the play in role day and in the position they would like to be in to establish credit ability with the customer. So that’s basically you know what we are doing with censors and I think you know its been successful so far, at the early stages and we got some announcement coming in May and later in the year that you see will continue re-enforce this approach of the market place and you know and we said all along and told our partners we don’t want them to give up their VMO franchise.

Bhavan Suri

Right, right.

David Henshall

You know at all is matter.

Bhavan Suri

So just.

David Henshall

We walk and talk to the customer choice and we want to provide differentiate offer

Bhavan Suri

Sure. So I guess could you provide little color so for as they DELL and HP, what position of service, are you expecting to ship with XenServer embedded, any color around that?

David Henshall

No. Unfortunately, that no one knows at this point, and the products have been on the market place for about three weeks. It’s a user selectable option. I can tell you that when you order an HP ProLiant with the XenServer OEM express edition, it looks like the software is a piece of the hardware, it looks like and feels like it's part of BIOS and that is what we believe happens in this market place that in the future, right know it’s user selectable et cetera, but eventually this will be a property of the server and the high provisory melted in hardware and you know like we are being aggressive on how we are building these products for companies -- great companies and partners like HP and Dell and while we believe that with every server and the data center needs to have that as property so that our XenServer capabilities can be utilized with every single server weather it’s virtual or physical.

Bhavan Suri

Okay, one last quick question turning to the online services and segment, could you provide a little color on how that plans are for expanding that internationally, I know we talked about that at the Analyst’s Day, I just wanted to see if you’re going to update on that?

David Henshall

Yeah, pretty much on track with the plan, and we are open in the UK and Australia. We are and we have some core markets that we’re starting to put the pieces in place around. Germany would be one of those key ones for example, and that there are a lot of pieces that have to go in place for you can enter market like this as we discussed at Analyst’s Day given that the buying methodologies and behavior and e-commerce and you know online are very different as you go from country to country and so the platform, you just don’t open the website up with translate - with language translation. You really have to do a lot of underlying technical work to adapt to the local way of doing business. So, we are on track with that and I think that again the geographic exposition is pretty deliberate, pretty step by step taken the first steps – serious steps this year and we will take all year for that to start play out.

Bhavan Suri

Great. And do you have a number for what online services will be in the next quarter?

David Henshall

You mean, the guidance number?

Bhavan Suri

Yeah, I don’t know if I missed because you typically give one out, I think.

David Henshall

No, we didn’t provide one, but I think somewhere in the – say 65 additional million range.

Bhavan Suri

Okay, great, thanks guys.

David Henshall

Thank you.

Operator

Our next question comes from Steve Ashley from Robert Baird. Your line is now open.

Steve Ashley

I wonder first of all you could comment on the status of the different program. We have been taking about in the while and you still put up very nice growth in your license update line is - still getting attraction and what’s the kind of the outlook they are on that license outlook update line in terms of what kind of growth we might see.

David Henshall

First Steve, we are continuing and doing pretty well, it’s you know get current bookings, any one quarter going to be somewhere in the 10 to $20 million range got a you know millions of actually in stock base seats out there that are on prior versions of the software and just – and on currently on the subscription advantage program, so the more value put into the product more compelling of this too get current so as big and get back. As far as the license update line you know the key driver there is really going to be the combination of incremental product license revenue. To revenue license you know creates a base of subscription advantage as well as just increasing the renewal rate you know we had a mid 80s renewal rates this quarter and we’ve got you know expectations for that to continue to you know slowly move up towards the 90% or even above that couple of years. So, lot of head room still continuing to do well.

Steve Ashley

Great, and then actually Mark, you really talked you know quite extensibly about some of the differences between the XenServer offering what BMR offers but I wonder that I know, I am confused on this. The relationship to high level management to specifically maybe Microsoft tools that is related to the XenServer or XenDesktop, is that an area of differentiation or importance of something we should - we should be aware of?

Mark Templeton

I think over the next couple of years it will become more important, as Microsoft does some things to basically integrate with the open interfaces that part in the server and I think they you know pretty much publicly said that they are going to first manage the BM environment with there SCGNM tool and that you know we want them to get in and manage and allow us to snap in as well, but we think that’s a little further out on the development road map for them.

So I think - I think the high level environments are important but you know there is a line between sort of snapping into system’s management infrastructure and how products do that and the kind of management that’s a need for in depth configuration control and even workstation of products and that usually falls in the hands of the vendor that supplies the products itself. So you know it’s not an easy work you know story of the both.

Steve Ashley

Thank you.

Operator

Our next question comes from [Eric Schwartz] at J.P. Morgan. Your line is now open.

Eric Schwartz

Good afternoon, I had a follow up question on the license update line, I am just wondering given the traction you had with Platinum over the last several quarters and all the dynamics there with increased prices and higher ASPs, why the growth there wouldn’t pick up or that is still a downstream effect that we should look for the balance of the year?

David Henshall

I think overall, I mean you just through the map you are looking at overtime the growth rates of license updates in the line with the growth rates of total license and probably more specifically around the app virtualization license, which last year was up by about 11%. Obviously, the last couple of quarters we have been accelerating past that and that’s one of the things that’s keeping the license update line growing as strongly as it has, I mean I think it grew 19% in Q1. I would expect it to grow north of 15% in Q2 and maintain these pretty good attractions throughout the balance of the year.

Eric Schwartz

Okay, but we shouldn’t expect an outbreak there this year from the deduction impact of the outside growth of the Platinum over the last several quarters?

David Henshall

No. I wouldn’t expect it to accelerate, I mean the numbers are so big that the Platinum is going to have some time to move in there, but I think you are spot on with and it’s a real good trend and as Platinum contributes more and more of the overall mix overtime, it certainly going to help that growth rate, maintain its current trajectory.

Eric Schwartz

Okay, and the other question I have is just the OEM relationships you have with the XenSource business, I want to understanding the revenue mechanics around that and how it’s recognized in over years? Do you expect to generate to growth through the OEM’s on their paper or is it more, they are cheating the market for you to have the up sell potential at one stage; they get the product out there?

David Henshall

It’s both.

Eric Schwartz

Okay, so you would expect to see material revenue contribution on the OEM paper?

David Henshall

Yeah, I think that it sounds just the OEM’s backed the first part of your question, whatever they sell this quarter and in Q2, we’ll get a report you know sometime 30 days in the Q3 and will recognize that in Q3, you know once we get actually get the complete data. As far as them participating as a channel, they do have the ability to obviously offer a license key upgrade to turn on the bits that are already on the server and so will be working with the partners closely to just frankly make them part of the channel. And we could see that revenue perform at the royalty reports potentially because that will come through our normal distribution mechanisms to resource as opposed to being and interviewers piece of revenue on the royalty report.

Eric Schwartz

Okay that’s helpful and then the last question, do you anticipate any price change on MPX to back into the growth in the second half you talked to?

Mark Templeton

Price change, we haven’t announced pricing yet. MPX is a new product and.

Eric Schwartz

You just managed to step up in pricing, is that part of the gross story in the second half?

David Henshall

Well. If you step up in price but remember scalability is you know 2X, the products that it would you know be purchased in lieu of and so you know basically its priced to value and no others in a big you know there is an big step up in price for you know kind of mix if you will ACTP transaction et cetera related to the current platform.

Eric Schwartz

Okay. So the growth of the functional volume rather than price.

David Henshall

Yes.

Eric Schwartz

Okay. Thanks for taking my questions.

David Henshall

Thank you.

Operator

Our next question comes from Katherine Egbert from Jefferies. Your line is now open.

Katherine Egbert

Thanks, good afternoon. Couple of quick questions, first I want to back to the guidance. You lowered the lower in the forecast for the year and in June there are some conservative, is it correct that you are lowering this because specifically of the US based AMG business or is there more in there?

David Henshall

I think you know we expanded the range a little bit. We left the top in other range intact, we took the bottom range down by $15 million which I mean its not a big number against the $1.6 billion based but its really just a commentary on you know probably less visibility with certain parts, certain segments of the US marketplace.

Katherine Egbert

Is it specific to ANG?

David Henshall

Not specifically, just more the general commentary.

Katherine Egbert

Okay. And then can you help us with some guidance on the operating margin on the non-GAAP basis both for Q2 and the rest of the year. Can you just give us a feel of what you are tracking towards?

David Henshall

Yeah, I think operating margins are going to be you know roughly in the expectation that people have right now for the full year kind of in that you know 22% - 23% range, and for the second quarter in that 20% - 22% range is probably an appropriate way to think about right know.

Katherine Egbert

Okay. That’s helpful, good quarter.

David Henshall

Thank you.

Operator

Our next question comes from Kirk Materne from BOA Security. Your line is now open.

Kirk Materne

Yeah, thanks very much. David, just in terms of the Xen app business clearly the shift to Platinum is pulling up growth a lot for that business. Has there being any real change though in terms of just the actually unit volume so the meaning I know there’s obviously a very favorable impact of revenue because the ASPs are shifting higher, and I am just wondering over the last year have you guys been you know the seat numbers going up you know the rates higher than they were before we went into this upgrade cycle and you look as you look out over the course of the year is most of the growth you know above the certain going to have to continue from shipping more than platinum, I’m trying to get a sense on the you know the underlying fundamentals of that the [seed] growth and it’s certainly just the revenue impact as you shift your platinum?

David Henshall

Right. No, it’s a good point. It’s a combination of both, the unit volume has been growing you know very modestly if you look back in a couple of years and started to you know really started to pick up last year as you know really the components of the products started the shift. In Q1, we saw both you know modest overall blended ASP increase on a year-over-year basis and you know fairly substantial increase in units on a year-over-year basis.

Kirk Materne

Okay, it’s helpful and then Mark, when you guys look to creating this broader sweeter products around virtualization, yeah does it make sense ultimately to start coming with bundling solution, I know not only you include Xen app and then desktop and XenServer together, I mean, it seems that you know if you put – if you offer some of these things are created another I don’t know what kind of Platinum version would be but if you start to add in some of features from XenSource along with the XenApp does not also help drag XenApp in to be more strategic versus being viewed as more tactical which I think has been the case over the past few years, over the longer term?

Mark Templeton

Yeah, I think 31st it’s really good idea it make lot of sense both operationally and strategically and then the rest of the question is really about when and the mechanism around that. So we are looking at number of options to make it on one hand easier for customers to consume all of this infrastructure because in the end we have declared from day one that we are building a system here that tend to end and all the stuff is designed to eventually to get operate very nicely and as soon as work flow studio is introduced we will have the kind of glue that we need to be able offer a customer kind of all these components maybe in one package. But there are number of combinations in front of invitations we are looking at and so stay tuned on that.

Kirk Materne

Its great thanks very much.

Operator

The next question come Israel Hernandez from Lehman Brothers. Your line is now open. Mr. Hernandez your line is now open. Have you muted your line sir.

We will go on to the next questioner. Your next question comes from Walter Parkes from Cohen & Company. Your line is now open.

Walter Parkes

Hi, thanks. Just David one question on the numbers I notice there was in the cash flow there was $20 million payment I think it was for a license or a core technology something like that could you just give us a little more details what was that all about?

David Henshall

Yeah, every quarter we do a number of -- not every quarter, but frequently we will do a number of small transaction, licensing core feature technology for one of the products or very small product or new service type organization. In this last quarter, there were – there was actually three smaller transactions targeted towards our WANScaler business as well as our present desktop business.

Walter Parkes

Got it, and just kind of follow on, is that related to the – a lot of talk about our NetScaler and new product coming in so forth any commentary on how WANScaler and the SSL VPN product of probably a small per that ANG business, how those products performed versus what you expected?

David Henshall

I think, those performance was within the expectations and you know just to remind you the way we way look at the SSL products as well as the WAN optimization project more with differentiating technology then a point product solution and so we intend to sell those technologies as part of the larger, you know, larger end-to-end solution for customers but on a standalone basis that will be at small numbers, they were fine, they were within plan.

Walter Parkes

But, I mean just lastly around the income Mark, you mentioned you are looking for the same sort of $50 million contribution around then this year. In terms of your spending plans is that an area in terms of tally back your spending were you may look to back spending around the runs and I think that was majority of reason why earnings had a headwind this year with I think spending $60-$70 million just wondering how that factored in your spending plan?

David Henshall

Yeah, not in any significant way, we also, I mean obviously were, yeah you put a plan together and as soon as put together its well, I mean, it’s just the way our business plans are, so we are managing this on a month-by-month basis and you know kind of doing slow controller on hiring on programs on you know developments, some licensing things you know cut about full range but I think we are going to you know basically be on track because if we don’t put the money and upfront then you know we are just not going to be on growth trajectory that we want to be on. We think, we can be on going into 2009.

Walter Parkes

Great, thanks a lot.

Operator

Your next question comes from Robert Breza from RBC Capital Markets. Your line is now open.

Robert Breza

Hi, thanks for taking my questions, most of my question have been answered but you know Mark, I was wondering if could maybe talk qualitatively and with customers and talk about the you know weakness in North America and then delays in the new products coming out of the networking group. We would say it’s you know 50% new product delays, 50% economy, are there is any type qualitative characterization, if you give us it will be helpful? Thanks.

David Henshall

Well, Robert you know, I mean honestly that the different - the usually different conversations with customers, I would say that you know overall when I had these conversations that lead them feeling left by the kinds of technologies we are offering and how we package and license them because in a work I mean, we had an incredible Q1 in terms of large deals, you know, seven figure deals but it’s a big fund usual and that serves us well and you are not company that relies on that kind of flow in these kind of times because, you know, few things get cut when spending gets tight. The giant projects that you know, get put off and the really small ones that are discretionary and they just fall right off the bottom. And so, I was pleased feeling likely the you know, we have tangible ROI and investments Citrix products generally speaking on provides tangible cash feedback and there is a strategic value that is on going for over and ever. And so, for us the impact is much slower on the networking side those conversations you know, I characterized and I think that you know networking decisions other than quitting on more capacity to support lets say web traffic when there is a public facing website or you know pulled out a new branch operation or something like that of course those things are going to happen but big refreshers of infrastructure are being delayed I believe in the networking area.

And then the other sense is I think they are generally cautioned everyone on is that this is a everyone watches CNN, CNBC gets depressed and is because of the same story over and over again. And this is a mark by mark kind of phenomena that you know we just have to watch carefully and I think you know as a company that had a long standing track record of great execution with a couple of quarters where we disappointed. We are very sensitive to watching the trends and making adjustments out ahead; even if there is a little conservative we can always accelerate and spend more but to unshoot the bullet is often difficult and painful. So, I just think we are being smart about it and it’s pretty much that simple in terms of, how you know we are steering and looking into the future.

Robert Breza

Great, thank you.

David Henshall

Your welcome.

Operator

Our next question comes from Richard Sherman from MKM Partners. Your line is now open.

Richard Sherman

Good afternoon guys, the question is about headcount, simply head count there we had about 200 heads this quarter. Just looking at revenue per employee its just a little bit over last several quarters and there is some seasonal impact that just going back and so get to lowest in about six quarters, as you look at the business going forward and as you making measured investment and then in other areas, you know may be give us some idea what head count, you know, what rate of head count addition is likely to be about 200 a quarter is going to be significantly less, you know, how you think about the decision process on what revenue your numbers you need to see and ordered to that you could see higher end at you know whatever the rated that you have internally plan?

David Henshall

Right. Yeah I think it will like you said we have been adding couple of 100 people for quarter over the last several quarters, a lot of those focus really our capacity service customer along the globe both in terms of networking business and then really gave round up for the newer business around XenServer and desktop et cetera. And you know we are going to moderate our higher end really in the face of you know what we see from our customers and kind of our broader economy commentary. I got to freeze head count, but it will be more selective and target head count growth into the parts of parts of the business that are really early you know and strategic you know over the next couple of years. So you know, I would expect head count growth to be lower in Q2 and then you know Q3 and Q4 really going to be predicated on what’s going on with the you know overall customer base and save the economies. So I will just low in the short term and like I said prepared remarks just trying to make sure we are lining our investment spending with the current stay in the business and trying to be proactive there.

Richard Sherman

And they had may be just to be hard one to answer but when you look at XenServers and Desktop business about how many FTE’s the estimated that you have committed to that business right now? I know it gets hard when you get out, with sales our marketing over lap and the like?

David Henshall

Yeah I’ll take, I take I think will probably some where in the 180 to 200 FTEs. And you know you can track probably about the 100 a little over the 100 in the sales team, that we can put our finger on. We can track about another you know 70 or so better in the development set your teams and in the rest would be you know kind of in admin and you can a share services and also you know so that’s why to estimate those you know probably put on other 10 at 15 FTEs on top of that.

Richard Sherman

Okay. Thanks for taking my question.

David Henshall

Thank you, thanks Richard.

Operator

Our next question comes from Daniel Ives from Friedman Billings. Your line is now open.

Daniel Ives

Yeah. No more question but I appreciate they are having a candid discussion I appreciate that. Thanks.

David Henshall

Thank you, Daniel.

Operator

Our next question comes from Manny Recarey from Kaufmann Brothers. Your line is now open.

Manny Recarey

Thanks, just a couple of housekeeping question, can you give the stock comp on operating expenses?

Mark Templeton

Actually we don’t have that, Manny we will post that on the investor relations site and make that available after the call.

Manny Recarey

Okay, looking at the R&D lines you know you had a petty big jump from the fourth quarter to the first quarter on a GAAP basis just kind of curious is that a – how is that we can look at from model going forward versus some items in there that are more kind of one time quarter related?

David Henshall

I think that the increase in R&D both and on GAAP and on an adjusted basis I mean its going to be out materially on – sequentially. We got a lot of capacity both to XenServe and XenDesktop largest increase coming from headcount growth and so we are front running some of that it may moderate a little bit in the back on the year but, you got the full quarter impact of the XenSource acquisition in Q1 which you just hadn’t had in the other quarters.

Manny Recarey

Okay, thanks.

Operator

Okay, our next question comes from Brent Williams from Benchmark Company. Your line is open.

Brent Williams

On the net scale of business looking at you know the one side of the house the internet customers the other with the commercial customer is either one of those groups being more cautious about CapEx then the other right now?

David Henshall

I don’t think so. I think about the same.

Brent Williams

Okay an then secondly on your call last night those other virtualization folks talked about some new channels retention programs put in place are very recently in the quarter you know they had first way after you guys went out on October and unveiled yours they came out with a wave of channel programs. It sounds like they are up to some more stuff can you give any color what you are seeing from those brand X there?

David Henshall

Not as especially I don’t think there is anything that you know that going on that we believe is an obstacle to what we are doing. We have a great channel relationships and a great track record and that’s reflected in our programs as well as our relationships as well as our channel’s profitability. And we are predictable partner and that’s what it takes to be a great channel company and so I can see anything I’ve seen some of the reports on some of the programs, they are logical things that you will do if you are trying to do a better job with channels, so that’s kind how I’ve seen it.

Brent Williams

Okay. Thanks for taking my questions.

David Henshall

Okay, Brent.

Operator

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

David Henshall

Alright. I think I’ll close it out and just want to thank everyone again for joining us, and I hope to see that we are continuing to execute well. We have a unique strategy and with determined mindset passion as you always you know see in this company and I’m really proud of our performance on the behalf of 5000 Citrix employees, I thank all of you for your confidence, support, and trust, so we will see in three months. Thank you.

Operator

Thank you for participating in today’s Citrix conference Call. You may now disconnect.

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Source: Citrix Systems, Inc. Q1 2008 Earnings Call Transcript
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