Layoffs at Citrix…What’s Next?

Over the past couple of days, various Citrix employees have been invited to meetings and conference calls wherein they’ve received layoff notifications. While the full extent of the layoffs is unknown, it appears that the Octoblu, ShareFile/Podio, XenMobile, and App Layering teams have been the most profoundly affected. Most concerning is that XenApp/XenDesktop, the cash cow of the company, also suffered as part of the layoffs.

Teams from around the world are included in the layoffs. From the Citrix/Microsoft team in Redmond, Washington, USA, to development teams in Cambridge, UK, and elsewhere around the globe, Citrix employees have been terminated. Most concerning is that some key engineering rock stars are among those who are no longer employed by Citrix.

New Citrix Management

It’s not uncommon for a new CEO to change the course of a company after a few months. David Henshall has been the president and CEO for three months and started making some changes in the past few weeks. Carlos E. Sartorius, executive vice president for Worldwide Sales and Services, suddenly retired, and Mark Ferrer, formerly chief operating officer and executive vice president of Global Customer Operations at SAP, has replaced him. In addition, Ajei Gopal, president and CEO of ANSYS, a design software company, was appointed to the Citrix Board of Directors.

There was change in the air, but the slicing and dicing that has occurred this week has been far beyond what had been expected. It appears that many long-time staff and management employees were also affected by the cuts, people who were the engine that kept Citrix humming. Now, there’s largely silence.

Preparing for Acquisition?

Layoffs just after the end of a quarter typically indicate that the company did not meet expectations or that a major change is in the works…or possibly both. While Cloud adoption has been increasing, it certainly raises the question of whether the transition and associated revenue are happening according to the required timeline in order to cover investments.

The Citrix Cloud initiative was initially married to Microsoft Azure. But over the past few months, Citrix has become chummy with Amazon Web Services and Google Cloud, possibly an indication that not all is rosy with the Microsoft team.

Could Citrix be preparing for an acquisition? The rumor mill is certainly rampant with assertions of such. Back in March, reliable sources stated that Citrix was indeed for sale. Large acquisitions take time, but now, the probability certainly seems much higher that something major is in the works. A small spin-off can happen relatively quickly, so this layoff may be the commencement of a more disruptive process.

Who would buy Citrix? First, let’s think about which company financially is in a position to do so. Microsoft, Cisco, IBM, Oracle, and Google are potential suitors.

As always, Microsoft tops the list, but there’s already a cha-ching in it for Microsoft licensing fees in conjunction with each Citrix sale. While acquiring the company would increase its revenue, the upside for Microsoft isn’t tremendous, and changes to the competitive landscape may not pass regulatory approvals.

Cisco was an ideal suitor in the past, but it has had major struggles in the networking and hardware space, as well as numerous layoffs. A year or two ago, I would have speculated that Cisco and Citrix were a match made in heaven, but not so much these days. If the company is to be dissected, selling the NetScaler business to Cisco makes absolute sense.

IBM could certainly absorb Citrix, but rumors of interest are virtually nonexistent. IBM already has a tremendous number of moving parts within the organization. While its SoftLayer offering could provide a home for Citrix Cloud, there just doesn’t seem to be alignment. Never say never, but in this case, probably not.

Oracle is an interesting potential acquirer. Oracle’s acquisitions have been carefully masterminded and largely successful; further, it certainly can afford the price tag. The acquisition would provide Oracle with a deeper footprint into servicing applications and could serve to elevate it out of the second-tier cloud provider rankings.

Google and Citrix have recently made some announcements about their partnership that are indicative of a blossoming relationship. Ironically, Diane Greene was the archenemy of Citrix when she led VMware, but now that she is the head of Google Cloud, the relationship appears to be positive overall. Google Cloud is aggressively seeking market share, and acquiring Citrix may serve to bolster those efforts.

If Citrix is indeed preparing itself for an acquisition, the list of potential acquirers will be dependent on whether the company will be sold in its entirety or separated based on business units. Oracle and Google are strong candidates for a complete acquisition, but if the company were to be split up and sold, numerous potential acquirers would likely have interest in subsets.

 

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