Citrix Shares Fall Even With Positive Results

Citrix Systems (NASDAQ: CTXS) reported solid aggregate 3Q results, but the significant desktop virtualization momentum of the 2Q took a pause. While J.P Morgan views this as logical given the timing of the termination of a previous pricing promotion, the stock seemed to assume otherwise more recently. Non-GAAP EPS of $0.51 (excluding a $0.10 tax benefit and a penny from greater than expected other income) on revenue of $472M exceeded consensus estimates of $0.49 and $458M, respectively. Strong operating cash flow of $190M grew 42% from a year ago, but deferred revenue declined 1% sequentially in the period.Management appears confident that it is well positioned for the 4Q and beyond. However, JPM would caution investors that although J.P Morgan views the desktop virtualization opportunity as incremental to Citrix, it is also cannibalistic, and not likely of the size many seem to expect for this market.J.P Morgan has a Neutral rating on CTXS with a $45 PTCTXS closed Thursday at $58.42