Earnings Preview: Citrix Systems

Citrix Systems (CTXS) is expected to report Q2 earnings after market close Wednesday, July 23, with a conference call scheduled for 4:45pm ET.

Guidance

The consensus estimate is 36c for EPS and $387.01M for revenue, according to First Call.

Analyst Views

The company provided guidance for Q2 on its last earnings call of 35c to 38c for EPS and $380M to $390M for revenue, which was below Street expectations at that time. The company also guided FY08 adjusted EPS lower to $1.54 to $1.64 on revenue of $1.6B to $1.645B. Kaufman Bros. believes that Citrix is poised to meet expectations, based on the company's history of execution, as well as its broad product line and ability to provide customers with meaningful value. Friedman Billings said recently that its field checks on Citrix have become incrementally more negative due to company-specific and macro headwinds. Although the firm believes the June quarter should still be relatively in-line with Street estimates, it is becoming more cautious on the outlook for 2H08 and 2009, as it believes the company will face a more challenging spending environment over the next 12 to 18 months. Friedman estimates 36c on $387.5M in revenue. The firm sees product licenses to come in at $151.2M, license updates to total $135.9M, and online services to total $64.2M, with the remainder of Q2 revenue coming from technical services. The firm says the Xen virtualization revenues remain in question. Friedman's checks around the company's newer Xen virtualization solutions indicate customer interest levels remain very high.

That said, given the current spending/macro environment, it is very uncertain whether Citrix will be able to meet its lofty revenue forecast for this segment in both 2H08 and 2009. Key issues for the earnings call: Forward guidance for financials, commentary on the telecom equipment spending environment and the company's outlook for their Xen virtualization solutions.