Citrix Systems Inc. (CTXS) reported robust financial results for the second quarter of 2012, surpassing the Zacks Consensus Estimates. We believe global trends toward virtualization and cloud computing will facilitated Citrix to report strong results.
The company continues to grow as virtualization and cloud computing becomes essential for business enterprises to reduce costs when the economy is yet to completely come out of recession. We believe business fundamentals of the company remains intriguing as the virtualization market will continue to flourish in the near future.
Nevertheless, management has provided a soft guidance for the ensuing third quarter due to economic sluggishness. However, the full year 2012 guidance still remains firm.
Citrix’s major competitor, VMware Inc. (VMW) also provided a rosy outlook for fiscal 2012. Meanwhile, the stock price has soared nearly 60% in the last year. We, therefore, downgrade our recommendation on Citrix to Neutral based on its high-level of current valuation.
Citrix is benefiting from the growing trend toward globalization and the virtual office. In order to expand further, the business enterprises continue to explore markets throughout the world. Virtualization and cloud computing have become one of the most effective tool of reducing costs as enterprises grow in size.
Instead of installing their own virtualization and data center set up, the corporate bodies are now sharing cloud computing platform of dedicated providers like Citrix. As a consequence, the companies require the IT infrastructure to support this virtual office. We believe large and medium sized enterprises will increasingly move toward more dynamic and converged infrastructure.
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