Citrix’s restructuring is in full swing

Citrix saw a big shakeup this week as it announced longtime president and chief executive Mark Templeton would retire and board member Asiff Hirji (of HP) step down, at the same time appointing Elliott Management’s head of activist investments Jesse Cohn to its board of directors. The company will also divest its struggling mobile traffic management division, ByteMobile.

Templeton served nearly two decades leading Citrix, and said that he will continue to serve as acting president and chief executive until a successor has been found. The company has enlisted Heidrick & Struggles to help identify potential candidates.

“I’ve announced today that I’ve asked the board to begin a search for a successor, but I do expect that to take some time,” Templeton said in a call with analysts this week.

“And in the meantime, I am passionately and intensively leading this change and working in partnership with the best executive team ever with I think more clarity than ever around getting to our core, leveraging assets that are on board. Making them work better together and yielding that value in the marketplace through our partners where we’ve got plenty of innovation and excitement ahead over the next six months.”

This week also saw the company report marginal revenue growth of 1.9 per cent year-on-year for Q2 2015, up from $782m in 2014 to $797m in 2015.

Much of the past year, since it initiated ambitious restructuring plans, has been about simplifying Citrix’s growing portfolio and bringing more focus on its core strengths in enterprise app delivery and data.

That said, Elliott Management – which has a 7 per cent stake in Citrix – has made no secret of its desire to see the company spin off any non-core assets, slim down the product portfolio and cut costs dramatically to yield higher rates of growth (it also actively encouraged the breakup of the EMC Federation for the same reason).

“In early 2014, Citrix again made a series of promises to address the operational and share price underperformance. Despite the fact that these promises were nearly identical to the promises made in 2010, many investors and analysts hoped that this time Citrix was finally going to remedy the serious deficiencies in its cost structure. However, operating expenses have continued to outpace revenue growth, and both profit margins and profit dollars have declined over the last 12 months,” Cohn wrote in an open letter to Citrix leadership in June.

“It is perhaps because Citrix’s promises have uniformly been followed by increased costs and greater product breadth that the research community maintains a skeptical approach to Citrix and continues to call for organizational change.”

“We believe CloudBridge, CloudPlatform and ByteMobile are non-core, are underperforming and are distractions to the management team.”

Citrix already said this week it’s planning to divest its mobile network traffic management arm, ByteMobile, and – if Elliot Management’s influence grows, which is likely  – could announce more divestitures and accelerated restructuring efforts in the coming months.