Citrix Systems Inc. (CTXS) recently entered into an agreement to acquire Bytemobile, a provider of video and data solutions to mobile network operators. The agreement was well received by the board of directors of both companies and is expected to be completed by the third quarter of fiscal 2012.
As smartphone and tablet usage is gaining momentum in the corporate world, the need for virtual network for mobile phones is also on the rise. Higher usage of mobile network has led to significant growth in network traffic. The acquisition of Bytemobile will help Citrix to integrate its NetScaler cloud networking technology with Bytemobile Smart Capacity technology, thereby reducing mobile network traffic.
The acquisition will also help Citrix gain access to Bytemobile's huge customer base. It will facilitate improved performance, better service and user experience, and in a cost-effective manner.
Continuous product launches and the huge growth opportunity in the virtualization and cloud computing market (Desktop virtualization is expected to touch the 100 million personal computers mark by 2013, and the web conferencing market size will likely reach $4 billion by 2014) will act as positive catalysts for the company going forward.
However, the ongoing macroeconomic uncertainty may act as a headwind for the company as it limits the IT spending of several firms. Additionally, high cost associated with virtualization may restrict the long-term prospect of Citrix. Finally, increased competition from VMware Inc (VMW) provides certain downside risks for the company.
We thus maintain our long-term Neutral recommendation on Citrix. Currently, Citrix Systems has a Zacks #2 Rank, implying a short-term Buy rating on the stock.
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