Citrix to cut 1,000 jobs and spin off GoTo business

Raleigh is considering a more formal program that would offer incentives for businesses to move to Raleigh, stay here or expand their presence here. Citrix Systems has received incentives from the city.
Raleigh is considering a more formal program that would offer incentives for businesses to move to Raleigh, stay here or expand their presence here. Citrix Systems has received incentives from the city.

Business software company Citrix Systems plans to eliminate about 1,000 jobs and spin off its GoTo business into a separate company.

The moves, announced Tuesday, are in addition to layoffs completed earlier this year that resulted in the cutting of 700 full-time employees and 200 contractors, about 9 percent of Citrix’s workforce.

It’s unclear how this latest restructuring will affect the company’s Raleigh office, which has about 600 employees. A spokeswoman said Wednesday that at this time the company isn’t breaking out where the cuts will be made. Only a handful of Raleigh employees were laid off in the earlier restructuring.

Citrix software enables a company’s employees to work from anywhere online. The company has been under pressure from activist investor Elliott Management, which urged the company to sell the GoTo suite of products that includes online meeting software GoToMeeting. Elliott, which gained a seat on the company’s board of directors earlier this year, has also said Citrix needs to become more cost-efficient.

Bob Calderoni, Citrix’s interim CEO and president, said on a conference call with analysts Tuesday that if Citrix sold the GoTo business it would have incurred a significant tax penalty, which made spinning off the division better for both the company and shareholders.

Citrix established a presence in the Triangle in 2011 when it acquired Raleigh-based ShareFile, which makes software that enables businesses to share files confidentially over the Internet. The company has since invested heavily in its local operations, moving into a new headquarters in downtown’s warehouse district last year.

Citrix executives said spinning off the GoTo business and shrinking the company’s workforce will allow it to focus more on its core products, including ShareFile, NetScaler, XenApp, XenDesktop and XenMobile.

“As with many companies of our size and scale, our business had grown too broad and complex and this was getting in the way of our execution, diluting our investments and oftentimes confusing customers and partners,” said Calderoni, who took over from long-time CEO Mark Templeton last month.

One local project that could be affected is Citrix’s Startup Accelerator Innovators Program, a 3-month program designed to help local entrepreneurs develop products. On a conference call with analysts Tuesday, Chief Financial Officer David Henshall said among the areas where the company plans to reduce its investment is startup incubators.

The latest round of layoffs, which includes both full-time and contract positions, will begin this week and is expected to be completed by January. The company has 9,100 workers worldwide.

Henshall said that while the earlier layoffs were “top-down,” targeting higher-level executives and senior leadership roles, this latest round would be “bottom-up” and “look at each and every individual inside the company.”

Citrix expects to achieve about $200 million in savings over the next 18 months from the moves announced Tuesday. It is now forecasting revenue growth of 1 to 2 percent next year and 4 to 5 percent in fiscal year 2017, excluding revenue from its GoTo business.

“We do see 2016 as a transition year, where the company will focus on executing against the plans we’ve laid out today,” Henshall said.

But a number of analysts on Tuesday’s conference call expressed skepticism about Citrix’s ability to ramp up its revenue growth in 2017.

In a research note, Mizuho Securities analyst Abhey Lamba wrote that he liked Citrix’s cost-cutting plan. Still, Mizuho downgraded the stock from buy to neutral.

“Although management’s 2017 revenue target is doable, it is early to have strong confidence in it,” Lamba wrote. “”We believe potential risk to estimates, the spin-off, a CEO transition, and potential disruption from the ongoing restructuring could weigh on the near-term stock performance.”

Mizuho has a price target for the stock of $80. Citrix shares fell $7.88, or 8 percent, to close Wednesday at $70.54. The stock is up 10 percent this year.

David Bracken: 919-829-4548, @brackendavid