Citrix: Desktop virtualization is snowballing

Citrix reported a better-than-expected second quarter in part because of its XenDesktop virtualization software.
Written by Larry Dignan, Contributor on

Citrix reported a better-than-expected second quarter in part because of its XenDesktop virtualization software.

The news is yet another datapoint that desktop virtualization is here and CIOs are ramping up adoption. VMware also indicated that it was having high level conversations with technology executives about desktop virtualizations. Citrix, however, appears to be booking the revenue.

Citrix reported second quarter earnings of $47.6 million, or 25 cents a share, on revenue of $458.4 million. Non-GAAP earnings were 41 cents a share. In short, Citrix missed earnings expectations, but delivered better than expected revenue growth. Citrix projected third quarter non-GAAP earnings of 48 cents a share to 49 cents a share on revenue of $450 million to $460 million. Those projections were above Wall Street estimates.

However, the Citrix results and ensuing earnings conference call were dominated by desktop virtualization. Citrix has a bevy of products---NetScaler, GoToMeeeting, XenServer and others---but its desktop virtualization tool, XenDesktop, is what got executives wound up. Citrix CEO Mark Templeton said "the desktop virtualization revolution is here now and adoption is accelerating." He added that XenDesktop licensing is on a tear and No. 1 in the market.

A few data points from Citrix's earnings report:

  • More than 3,500 customers bought XenDesktop in the second quarter;
  • 1,000 of those customers were new;
  • Citrix booked $60 million in revenue from XenDesktop in the quarter.

Templeton on a conference call set the desktop virtualization scene:

Last October we launched Version 4 of XenDesktop, as the first fully integrated Desktop Virtualization solution. Providing both virtual apps and desktops in a single license. We designed the pricing, packaging, and go-to-market strategy to drive top-down strategic engagements with enterprise desktop customers, and secondly, to upsell the high end of our XenApp customer base. Our goals were to drive primary demand for Desktop Virtualization and to maximize our share. Q2 saw a significant increase in organic market demand. Fully half of our XenDesktop business came from new customers adopting virtual desktops at the core of their enterprise desktop strategy. These decisions are being driven top-down from the CIO level, fueled by major market forces like the move to Windows 7 and new PC refresh cycles.

Demand is also being driven by the unstoppable wave of new iPads, Macs and smartphones that are flooding the workforce, often with the CIO leading the charge. We made it super easy for these users to connect their consumer devices to XenDesktop through Citrix Receiver, available as a free App Store download for devices like iPhone, iPad, Android, Windows Mobile and BlackBerry. In fact, over the past 12 months, we've had more than one million downloads of Citrix Receiver. Nearly 700,000 of them in the first half alone. Invariably, these CIO conversations turn to a more holistic discussion about a far simpler way to deliver desktops as an on-demand service. About increasing security and business agility. About improving employee productivity by enabling more virtual work styles. And about the rapidly growing interest in BYO. Leveraging the forces of consumerization around devices, around networks, around data, and identity. As CIOs consider Desktop Virtualization at the strategic level, they come to a conclusion. The conclusion is that no single technology will address the needs of all employees. They understand that VDI based desktops offer great security and agility for office workers but that achieving significant ROI across all types of users requires a broader solution.

The bottom line here is that the stars appear to be lining up for desktop virtualization. Templeton said virtualization adoption on the desktop is being pushed forward by multiple devices, including Apple's iPad.

Templeton said a sea change has occurred around desktop virtualization. He added:

The main change is that there's much more consideration around a strategic conversation, probably a little bit less focus on ROI and more focus on how does this help me across multiple fronts on the technology side and on the business side. And that's CIO conversations. So that's one change. I think the second change is clearly coming from the momentum, excitement, hype, whatever you want to call it, around iPad, and it's something that has far exceeded our expectations. But the size of the screen, the level of connectivity, the interactivity of it, the battery life, all these things are really perfect for becoming a new device for driving workforce productivity.

Toss in Windows 7 upgrades and it's pretty clear that desktop virtualization is at a key inflection point.

Related: Virtualization topic center

TechRepublic: XenDesktop whitepapers

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