Look, this article is quite long. If you read any of it – read point number 4…. That’s the where the killer punch is…
Well, yesterday was results day. And it does make for some interesting reader. I’m often surprised by how the bigger news feeders interpret these results – I kinda assume that as professional journalists who have to work their way thru sort of press-releases on a daily basis, that they would know more than I do.
What prompted this email was article by the register:
http://www.theregister.co.uk/2009/07/24/citrix_2q_2009_xen/
The article is entitled “Citrix: A long run to VMware: XenDesktop’s big quarter”. It makes quite a trival point – that despite the fact that VMware is larger company, Citrix made larger profits. But dig a little deeper in the stats and the article you soon realise all is not as rosy in the garden as you might think.
1. Citrix profits are up “UP a meager three-tenths of one per cent when compared to the same quarter last year”. What? We are now measuring in fractions a 1% growth….
2. Product license actually fell by 15%, but what pulled Citrix out of the doldrums was legacy upgrade licenses of $149.3m contributing 8%. Clearly, renewals is important part of any ISVs business – but it gives the impression that Citrix is being held up by products bought in the past, not by a surge of new business
3. In contrast VMware’s sales were “DOWN one-tenth of a per cent to $455.7m and its net income was driven down by the cost of doing business by 37.8 per cent to $32.5m.” Again were talking about fractions of a % which I guess when your talking in billions of dollars is serious money to you and me. The worrying thing I guess here is the growth in costs – which typically happens when a company is growing. You see sales are DOWN, compared to the bonkers years when the market was doing well. This kind of think – always comparing value of companies based on comparing previous quarterly results – without any referrence to the larger econmonic cycle is faulty to me. It reminds me of previous downturns. When companies release profits warnings which I sometimes humourously paraphrase as “You know that totally bonkers growth/sales/profit we had when the good times roll, well know the good time aren’t rolling – we doing slightly less well than we did then…” Que. Panic Selling and all round doom and gloom.
4. The killer statement is one that is tucked away here in the Registers article “Citrix did not provide numbers, but in the first quarter the XenDesktop and XenServer products together accounted for $7m in sales, which means sales of these products in Q2 came to $10.5m.”.
Hang on did I read that right. You buy a company (Xen) for $500m and it’s making a quarterly sales (not profit by the way) of $10.5m? And this is the company that is meant to take on VMware? VMware which is bigger company dervives ALL its sales from selling virtualization products (there’s no legacy presentation server licenses to prop up VMW sales, remember!). Clearly, Citrix has made some in roads by giving their product away for free, whilst charging for the upper-end features – with more than 100,000 download prior to the release of the XenServer 5.1 product in June. But as the register state “…letting people monkey around with freebie software isn’t the same thing as making money.”
What I would I love to see? I would love to see VMW buy CTXS. Then we would have the best of both worlds – the best of server virtualization and the best of desktop virtualization/server-based computing. Man, that would make those guys in Redmond take a step back and think. I doubt however that such a merger would get past the competition regulation!