Citrix is to decimate its workforce and spin off its GoTo product into a separate listed company as it seeks $200m savings and a return to its most profitable basics.
The loss of 1000 jobs, thought to be sanctioned under pressure from the activist hedge fund manager Elliott Management, represents 10% of the company’s workforce.
In July BCN reported that Citrix was considering its options for the future of its GoTo range of networking systems, which includes videoconferencing and the popular desktop sharing service GoToMeeting. At the time, Elliott Management, a 7% stakeholder in Citrix, made no secret of its wish 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.
In an operational review released on November 17th, the company said it would stop investing in certain programmes and products and shut down non-core products. The company said it expects about $200 million in annualized pre-tax cost savings, 75% of which is likely to be in 2016. The job cuts do not include the impact of the spinoff, according to Citrix. The job cuts will cost between $65 million and $85 million in the fourth quarter of 2015 and fiscal 2016 with most of the restructuring would be done in November and in January, Citrix disclosed.
The Go To business, which is valued at $3.5 billion to $4 billion (according to FBR Capital Markets analysis) could be sold as a separate business unit.
In a statement, Citrix said it plans to ‘increase emphasis and resources’ to its core enterprise products, including XenApp, XenDesktop, XenMobile, ShareFile and NetScaler. It has previously been reported that Elliott suggested that Citrix to explore the sale of NetScaler, a system that speeds up cloud based applications.
“We are simplifying our product, marketing, sales, operations and development,” said interim Citrix CEO Bob Calderoni, “Focusing on core strengths and simplifying how we work will improve execution, drive higher profit and begin growth in areas in which we provide the greatest value.”
Analyst Clive Longbottom at Quocirca said Citrix has become becalmed and can’t propel itself to the next level it needs to reach.
“It has a decent position as the main virtual desktop vendor, but with a new CEO and pressure from investors, Citrix has to do something,” said Longbottom.
However GoTo in combination with other technology such as ShareFile could have created the means for a massively scalable information platform, said Longbottom.
“There is one possibility around all this – a possible acquisition by another organisation. If Microsoft acquired a company that it has supported for so long, it would gain a platform for full desktop computing in Azure,” said Longbottom.