Citrix aborts LAN Systems deal as revenues, staff drop

Citrix aborts LAN Systems deal as revenues, staff drop

It was going to be the week Citrix Systems would springboard the launch of its new portal software, NFuse Elite, with the announcement of its first Australian customer. Instead, Citrix found itself parting ways with distributor LAN Systems last week and faced with the task of retrenching 14 staff across the region.

The news foreshadows deeper rumblings within Citrix following disappointing second-quarter results posted in the US last week.

Citrix posted net revenues for the three months to June 30 of $US117.5 million, down 20 per cent from $147.3 million in the comparable period of the prior year. Net income -- adjusted to exclude the effects of write-offs for in-process research and development and amortisation of intangible assets primarily relating to business combinations -- was $13.5 million for the second quarter, compared to $36.3 million for the same period last year.

Citrix CEO Mark Templeton said the results didn't reflect the true state of its customers' buying patterns and as a result Citrix's distributors took a hit over the quarter.

"While our second-quarter results reflect the overall weakness of IT spending, they obscure the general trend of our end-user customer demand," he said. "Overall end-user customer demand was essentially flat for the second quarter compared to the first. We experienced solid growth in electronic licence sales, but it was offset by a decrease in packaged product sales. That decrease in packaged product caused our distribution partners to lower their inventories, impacting our revenue."

The results prompted Templeton into action, immediately stating the company would reduce its global headcount by 10 per cent in order to reduce expenses. Citrix has around 1,900 employees worldwide and fewer than 100 in Australia. Citrix will issue 14 staff in the region with their walking papers next quarter, including five from Australia and New Zealand.

Alan Pettit, Citrix Systems' VP South Pacific, confirmed the company had ended its distribution agreement with LAN Systems. Pettit said Citrix is focusing on driving down the amount of inventory in the channel and as such can't sustain three distributors. Alstom IT and Express Data remain Citrix distributors.

Nick Verykios, managing director of LAN Systems, said the company would continue discussions on the future of its relationship with Citrix. Central to those discussions is the issue of profitability within Citrix's channel. So far, LAN Systems has been successful in driving Citrix sales in new markets and Verykios said this could be something that LAN Systems and Citrix could base a future business relationship upon.

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