Just over a year ago, the price of Citrix Systems' stock nose-dived on rumours that Microsoft planned to introduce its own multi-user version of NT to compete with Citrix's WinFrame product and to capitalise on the growing interest in thin-client computing.
Now Citrix's stock is nearly $US70 per share, twice what it was when the rumours surfaced, buoyed by Microsoft's decision to license the Citrix multi-user code. But can a company that handed over one of its key technologies to Microsoft continue to perform so well?
"For now, Microsoft has allowed Citrix to remain in the background, still doing its own thing, so it's a win-win situation for both companies," said Eric Heimal, technical architect at Harcourt Brace & Co, a Citrix customer. "But if this terminal server market explodes, Microsoft is positioned to dominate it. At that point, you have to question Citrix's survivability. Right now, Citrix is riding a wave that could come crashing down on them or they could keep surfing along."
At least for now, the wave is rising because Microsoft's decision to license the Citrix multi-user code has put a highly visible seal of approval on the concept of thin Windows clients.
In effect, Microsoft has taken over the hard work - creating and maintaining a multi-user operating system - leaving Citrix free to work at becoming the No. 1 supplier of add-on software.
Citrix's revenue was up nearly 130 per cent in the second quarter compared to a year ago due to increases in several areas: Citrix consulting and other services, licensing fees from Microsoft, and a small amount ($US7 million) from sales of MetaFrame, the first of the company's TSE add-on products.
At the same time, surprisingly, sales of the existing WinFrame product, based on Windows 3.51, held steady, despite Microsoft's impending release of TSE. Resellers expect WinFrame to continue to be a viable product for some time.
Citrix is counting on steady revenue from its existing WinFrame software, the new licensing revenue from Microsoft and strong sales of MetaFrame to carry the company until it can extend its product line to add new features for server-based, thin-client computing. Given Microsoft's history of adding more and more to its operating system, Citrix faces a formidable challenge.