Citrix, Cisco Bolster Partnership

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Citrix Systems Inc. (CTXS) is strengthening its partnership with Cisco Systems, Inc. (CSCO) as the two will be expanding their desktop virtualization business into the three most demanding areas such as cloud networking, cloud orchestration, and mobile workstyles.

In a bid to promote the cloud computing technology, both these companies have agreed to make major investment in people and resources, thereby creating global opportunities as well as reducing competition from other cloud service providers.

Both these companies have jointly served to popular clients by successfully deploying Cisco's Virtualization Experience Infrastructure (:VXI) smart solution with Citrix’s XenDesktop solutions. The partnership between these two companies has already taken virtual desktop solution to the next level. So it is highly anticipated that this new investment plan will continue to deliver positive results in the near future.

We believe that the continuous launch of applications for business clients coupled with huge growth opportunity in virtualization and cloud computing market will act as a positive catalyst for the company going forward. According to Gartner research firm, desktop virtualization is expected to reach out to 100 million personal computers, and the web conferencing market size will likely touch $4 billion by 2014.

However, stiff competition coupled with the ongoing macroeconomic uncertainty may act as a headwind for the company as it restricts several firms from reaching their targeted IT spending. Additionally, high cost associated with virtualization may restrict the long-term prospect of Citrix.  

Considering these factors, we maintain our long-term Neutral recommendation on Citrix systems. Currently, Citrix Systems has a Zacks #4 Rank, implying a short-term Sell rating on the stock.

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