Citrix Systems Investors Having Good Day After Elliott Management Delivers Letter To Board

Shares of Citrix Systems, Inc. CTXS were trading higher by more than seven percent heading in to Thursday's final hour of trading. Investors were buying the stock after activist investor Elliot Management delivered a letter to the company's Board of Directors urging the company to explore strategic alternatives that could boost shares to the $90 - $100 plus range by the end of 2016. Elliott Management also disclosed it owns a 7.1 percent stake in Citrix. "Citrix has great products in strong markets," Elliott Management said in its letter. "However, Citrix has struggled operationally and has consequently missed a profound value creation opportunity to capitalize on these products and markets." The investment firm continued that the company's 2010 promises of efficiency and achieving margin targets were followed by a period of nearly 400 basis points of margin contraction and an expansion into non-core product categories. In 2014, Citrix again made a series of promises to address its operational and share price underperformance but this was also followed by profit margin and profit dollars declines. Elliott Management proposed streamlining the company's sales and marketing operations, slashing R&D spend and selling (or realigning) what it considers to be none-core products such as CloudBridge, CloudPlatform and ByteMobile. In addition, Elliott Management also urged the company to explore a sale or spinoff of its GoTo product line and explore strategic alternatives for the NetScaler application delivery controller hardware and software line. Finally, Elliott Management noted that the company's balance sheet is under-utilized. At a "more appropriate" 1.5x to 2.0x net leverage ratio, the company could raise $4.5 billion to $5.3 billion to purchase back its stock through 2017 while maintaining its investment grade rating.