Investors hammer shares of Citrix Systems

The Fort Lauderdale, Fla.-based software maker's shares closed down $10.31, or 20 percent, to $41.25 on heavy volume of 50 million shares, more than seven times the stock's average daily volume. The shares, which traded as high as $122 in the past 52 weeks, have plunged about 30 percent in two days.

Dain Rauscher Wessels analyst Sarah Mattson cut the stock from "strong buy" to a "buy" rating, citing indications that Citrix's business might experience a lag during the current second quarter

Mattson left her revenue and earnings forecasts unchanged, but the analyst cut her 12-month price target on the stock to $90 from $135.

Citrix provides products that enable access to Windows NT, Windows 2000 and Unix applications from a range of computing devices. The company channels about 90 percent of its sales through approximately 7,000 resellers, with 100 of those generating the bulk of the company's revenue.

Mattson said in an interview that during her usual monthly check on the sales channel, she saw that "there was some indication that there was some (price) discounting going on." She noted that Citrix has rarely lowered prices to boost sales.

Mattson still believes the company can post $137 million in revenue, "but that number may be a stretch." The company might have to discount prices further, which may squeeze profit margins.

She estimates that Citrix will earn 22 cents a share for the quarter, a penny more than the consensus estimate. A First Call/Thompson Financial survey of 10 analysts has a consensus estimate of 21 cents per share for the June quarter.

A Citrix representative could not immediately be reached for comment.

Citrix also may be faced with sluggish acceptance of Windows 2000. Mattson said the slowed "advent of Windows 2000 has caused a delay in purchasing" of Citrix products.

"The company has also moved to bigger accounts and bigger deals...so the sales cycle seems to be lengthening," she said. These types of deals typically take longer to close and can pinch the company's revenue stream.

In addition, the company's chief financial officer was a no-show yesterday at the PaineWebber Growth and Technology Conference 2000, where he was scheduled to talk about the potential effect of a breakup of Microsoft.

Mattson, however, refrained from "reading too much into" the CFO's absence. "While we are hesitant to draw conclusions from the cancellation, in light of investor skittishness, Citrix management probably should have provided better insight into the situation," she wrote in her report.

As for the impact of the possible Microsoft breakup, "No one knows what's going to happen...(the final conclusion) could take two years," Mattson said.

The antitrust case might also help Citrix in the short term because "Microsoft is less likely to step into another territory," Mattson said. "That could give Citrix an opportunity in the short term."