Citrix CEO stepping down, activist investor joins board

Citrix Systems CEO Mark Templeton
Citrix Systems CEO Mark Templeton

Citrix Systems’ CEO Mark Templeton is retiring and a formal search is underway for the next leader, the Fort Lauderdale-based technology company said Tuesday in a series of late-day announcements that included its second-quarter earnings.

The publicly traded Citrix, which specializes workplace virtualization software that lets users run software remotely, announced significant organizational changes. They align with suggestions that one of its activist investors, Elliott Management Corp., made to Citrix on June 11 in an open letter. The letter called for a review of Citrix’s organizational structure as well as a share buy-back, an evaluation of two of its units for potential sale, and a more effective management recruiting strategy.

Citrix, one of South Florida’s largest companies, said that it has entered into a “cooperation agreement” with Elliott Management, a multi-strategy hedge fund that owns about 7.5 percent of Citrix’s common stock. As part of the agreement, Jesse Cohn, a senior portfolio manager for Elliott, has been appointed to the Citrix board to replace Asiff Hirji, who is stepping down immediately. The company will also search for an additional independent board member, mutually agreeable to Citrix and Elliott, which is one of Citrix’s largest investors.

In a separate press release issued Tuesday, Citrix also said its board of directors has formed an operations committee. The committee will oversee a comprehensive operational review focusing on improving Citrix’s margins, profitability and capital structure.

The operations committee will be composed of Cohn and three additional directors, including current Citrix director Robert Calderoni, who will lead the committee. Calderoni, who is also a director at another of Elliott’s investments, Juniper Networks, will also assume the role of as Citrix executive chairman. Thomas Bogan, Citrix’s current chairman, will become lead independent director of the Citrix board.

“We believe the addition of new and fresh perspectives to our board will ensure Citrix continues to lead in application networking and virtualization markets,” said Bogan, in a statement.

“We appreciate Citrix’s constructive approach and are pleased to have worked collaboratively with the board and management team to reach this cooperation agreement,” said Cohn. “We look forward to remaining a shareholder and working closely with the company towards our mutual goal of positioning Citrix for success and value creation.”

Under conditions of the accord, Elliott has agreed to limit its holdings to 9.9 percent of Citrix and abstain from seeking further board changes.

In addition, Citrix and its advisors are reviewing strategic alternatives for the company’s GoTo family of enterprise products, such as GotToMeeting and GoToWebinar, which could result in a sale or spin-off, the company said. Citrix also said it is in active discussions regarding a potential sale of its ByteMobile business.

After the market closed, Citrix reported financial results for the second quarter, including revenue of $797 million, an increase of 2 percent from the $782 million reported in the second quarter a year ago.

Net income for the second quarter was $103 million, or $0.64 per diluted share, compared to $53 million, or $0.31 per diluted share, for the second quarter a year ago. Earnings adjusted for amortization costs and stock option expense came to $1 per share and topped Wall Street expectations of 82 cents per share. The company also said its outlook for the year remains on track.

“We are starting to see the benefits of the restructuring actions we took at the start of 2015 in terms of margin expansion,” said Templeton, in a statement. “Through the additional actions we are announcing today, we’re taking steps to ensure that we are focusing all of our energy on our core secure app delivery offerings and setting the company up for even better execution, greater efficiency and profitable growth.”

On the New York Stock Exchange on Tuesday, Citrix shares closed at $69.63 — virtually flat compared to a year ago but up 9 percent for the year to date. Shares rose to $72 in after-hours trading following the announcements.

Citrix said Templeton will continue to serve as president and CEO and as a director until a successor has been appointed. The Citrix Board has retained executive search firm Heidrick & Struggles.

Templeton served as president of Citrix since 1998 and chief executive officer since 2001, leading Citrix into becoming a global powerhouse with $3.14 billion in annual revenue and 100 million users worldwide. He joined Citrix in 1995 as vice president of marketing. “Mark Templeton is a software industry giant. Under his 20 years of leadership, Citrix has transformed to a $3 billion global technology leader,” said Bogan.

Citrix, founded in 1989, now has about 8,000 employees and has offices around the world. The company announced layoffs of about 900 people in January.

“I will continue to focus on leading Citrix and driving value-creating change until we are ready to make a smooth transition,” said Templeton. “I have total confidence that the board will identify a great candidate to serve Citrix into the future.”

Follow Nancy Dahlberg on Twitter @ndahlberg.