A little birdie told me this morning that Citrix has begun following through with yesterday's warning that it would cut 10 percent of its global workforce, with some people in the Santa Barbara, Calif. office already receiving notice, according to the source, who is familiar with the proceedings.
Citrix, a supplier of application delivery infrastructure technology, has seen sales deals shrink or be delayed during Q4 2008. While the company reported fairly solid sales and earnings results for the quarter ended Dec. 31, executives said the cuts are necessary given the uncertain state of the global economy.
"We believe the economy is going to remain challenging for some time," said president and CEO Mark Templeton in a conference call with financial analysts Wednesday. "IT budgets for 2009 are in a state of flux," and spending plans are difficult to predict, he said.
The employee cutbacks are currently being made across all Citrix operations at all levels across all regions, CFO David Henshall said in the conference call. It's unclear exactly how many employees will be laid off, but as of early 2008, the company had some 4,600 workers, meaning roughly 460 are affected.
The cuts will save the company approximately $50 million a year.
For its fourth quarter ended Dec. 31, Citrix reported sales of $415.7 million, up 4 percent from the same period in 2007. Net income declined more than 4 percent to $60.1 million. During the quarter, product license revenue fell 9 percent to $162.3 million, but revenue from license updates grew 13 percent and revenue from online services increased 18 percent.
Sales of Citrix's XenApp application virtualization software were the most impacted in the fourth quarter, Henshall said. Sales of those products were down 3 percent to $276 million, and numerous contracts for the product were postponed or decreased in size.
However, the company reported healthy sales growth across its other product lines, including application networking software, server and desktop virtualization software and online services like GoToMeeting.
Templeton said the bleak economic outlook could even work in the company's favor because it forces CIOs to rethink IT system architectures and put more emphasis on virtualization, cloud computing and software-as-a-service (SaaS) technology -- all of which plays to Citrix's product strengths. For example, cuts in travel budgets are boosting demand for the company's GoToMeeting Web conferencing service.
For fiscal 2008, Citrix reported that sales increased 14 percent to $1.58 billion, while earnings for the year declined almost 17 percent to $178.3 million. Product license revenue increased 7 percent to $620.2 million for the year, while revenue from license updates grew 15 percent; revenue from online services surged 22 percent.
Citrix did not provide detailed guidance for the current quarter and for 2009, but said it expects revenue in the first quarter to be about 5 percent below that of one year ago, and it expects revenue for all of 2009 to be flat.