Citrix Systems: Inventing an Industry
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Somehow, the perception is that the ASP (Application Service Provider) market is a new thing. Well, there is a company that has been in existence for 10 years and during that time, has been providing ASP services for the corporate market. The company? Citrix (CTXS). Currently, the company has over 100,000 customers.
While companies recognize they need cutting-edge technologies to be competitive, these companies do not want to spend the resources and have the headaches of a sprawling IT department. A more attractive option is to outsource IT functions. This has become much easier with the Net, which allows for IT services to be centralized on outside servers. ASPs can manage these services and companies can focus on their core competencies. The business model is simple. Companies pay a monthly fee for the services. This is very different than the traditional model for software, in which companies license technologies.
Over the past ten years, Citrix has proven to be a company that knows how to seize new opportunities. Yet, the company leverages its key technologies, especially those from Citrix's flagship product MetaFrame. The product is kind of like a high-tech Switzerland; that is, it does not matter what platform a client user has: desktop, wireless device, dumb terminal, whatever. Citrix calls this "Digital Independence."
Yes, the ASP space will increasingly become more competitive, with Sterling Software, Sun Microsystems, Santa Cruz Operation, and Microsoft pressing hard. Then again, the market is expansive and big enough for many high-quality competitors.
Most importantly, Citrix has dazzling financials. In the fourth quarter, the company had net revenues that zoomed 56 percent to $118.1 million. Net income was $37.7 million, which compares to $24.7 million for the same period a year ago.
Actually, Citrix is shifting towards a direct sales model (much like Dell's approach). This should translate into more cost savings and higher margins.
It's been a winning recipe: rapid revenue growth, high profits and focus. So with the ASP market starting to ramp-up quickly, Citrix appears to be one of the best positioned to reap nice gains for shareholders.
------------ Is Citrix positioned to become the ASP market leader...are they already? Discuss it here
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