An activist New York hedge fund with 7.1 percent of Fort Lauderdale-based Citrix Systems’ shares has publicly requested a meeting with the Citrix board about an operational overhaul to slim down assets and fatten its stock price.
Elliott Management Corp. is a multi-strategy hedge fund with a significant and growing focus on technology. The fund, with $26 billion under management, also invests in real estate, corporate debt, commodities and other areas. Besides Citrix, its technology holdings include Juniper, where it owns 9.94 percent, Compuware, BMC and Riverbed.
Elliott is currently Citrix’s third-largest shareholder, behind Vanguard and Invesco, and its largest hedge fund investor.
In its public letter to Citrix’s board and CEO Mark Templeton, the hedge fund presented a multi-pronged plan. “We believe that Citrix can achieve a stock price of $90–$100+ per share by the end of 2016,” the letter said. “This outcome — which represents an increase in stockholder value of approximately 50 percent — is achievable because Citrix has leading technology franchises in attractive markets but has struggled operationally for years. As a result, today Citrix’s operations and product portfolio represent an opportunity for improvement of uniquely significant magnitude.”
The stock closed up $4.50, or 6.8 percent, to $70.47 at the close of trading on the New York Stock Exchange on Thursday. With Thursday’s close, the stock is up about 10 percent over the past year.
Citrix, whose products include workplace virtualization software that lets users run software remotely, issued a statement Thursday afternoon: “Citrix has always maintained an ongoing dialogue with our shareholders, and we welcome their input. We will review Elliott’s suggestions and respond as we do with all shareholders who engage with us. The Citrix Board and management team continually evaluate ideas to drive shareholder value and are committed to acting in the best interests of all our shareholders.”
Elliott’s letter, signed by Senior Portfolio Manager Jesse Cohn, lays out what it calls the “New Citrix Operating Plan” that it says was formulated with the help of a team of operating partners “with proven experience turning around software companies.” It calls for, among other things, implementation of operational best practices in sales and marketing, R&D and its product portfolio, which it says is too broad and unfocused. For instance, the letter recommends selling CloudBridge, CloudPlatform and ByteMobile, as well as spinning off or selling the GoTo franchise and exploring a possible sale of NetScaler.
The letter also called for improved oversight: “A strong and capable Board that oversees and holds management accountable is critical,” the letter stated.
“We approach this opportunity with tremendous respect for the work Mark and the entire Citrix team have done to achieve technological leadership, particularly in the high-quality markets in which Citrix participates. ... Elliott is prepared to push for change directly, but the far better course is for Citrix to embrace this offer of cooperation and for us to proceed collaboratively, and quickly, together,” the letter said.
Analysts who watch Citrix have been mixed: Four have strong buy ratings, 12 show buy ratings, 16 say hold, three maintain an underperform rating and one is a sell, according to Yahoo Finance. Two, Goldman and Berenberg, recently downgraded the stock.
One analyst, Stifel, weighed in with a research note Thursday on the news of the letter: “In our opinion, it is a matter of when, not if, serious operational changes will be made at Citrix. The bigger question, in our minds, is whether or not the existing management team will be involved in the process. We remain buyers and raise our target price to $89.”
Elliott Management, founded in 1977, is led by Paul Elliott Singer. The fund has invested in Citrix on and off over the years and began accumulating a serious stake in the company in the past several months.
Citrix, founded in 1989, now has about 8,000 employees and offices around the world. The company announced layoffs of about 900 people in January.
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