By David Gross
The expectations for F5's quarterly earnings report this Tuesday got a big boost from Riverbed beating expectations on its call Wednesday, and were lifted further with Citrix reporting that its data center revenue grew 47% year-over-year to $84 million, led by its Netscaler load balancer. Sales of the software-based Netscaler VPX were up 40% sequentially.
Citrix got into the load balancing business in 2005, when it acquired Netscaler for $300 million. The product line brings a sharp contrast to F5, which is still the market leader, in that Netscaler has been built around merchant silicon, including Intel Xeon processors, while F5 has invested significantly in developing its own ASICs. Nonetheless, with tie-ins to the company's XenServer hypervisor, Citrix has vaulted into the number two spot in the load balancer market, although it still trails F5 nearly two-to-one.
In total, Citrix's revenue was up 18% year-over-year to $472 million, with guidance for next quarter of $500-$510 million. But just as we saw with Juniper and VMWare, the company expanded margins by increasing revenue at a much faster rate than operating expenses. Sales and marketing costs increased at less than a quarter of the pace of the revenue gain, moving up just 4%. However, R&D costs rose 27%, but total operating costs still rose just 11%, allowing operating margins to improve from 14% to 17%. Like Juniper, Citrix has been hiring more engineers while keeping marketing and finance headcount fairly flat. But for Citrix, this is a noteworthy achievement, because Layer 4-7 switching generally requires much greater support than L2-3 switching and routing.
The company generated $190 million of cash from operations, with its cash balance now sitting at $1.59 billion, up from $1.2 billion at the beginning of the year. With an $11.4 market cap, it now has an EV/Revenue ratio of 5.5, which is not cheap, but investors can't overlook Citrix's ability to grow its revenue faster than its headcount.
Showing posts with label CTXS. Show all posts
Showing posts with label CTXS. Show all posts
Sunday, October 24, 2010
Thursday, October 7, 2010
Volatile Data Center Stocks are Good for Data Center Businesses
By David Gross
As it was losing nearly a third of its value yesterday, Equinix (EQIX) saw 30 million of its shares change hands, representing nearly 70% of its float, and 40 times its normal volume. 3.1 million of these shares traded on Direct Edge, whose primary data center is Equinix's NY4, which is just across the Hudson from Wall Street in Secaucus. Many investors are familiar with retail analysts who walk around malls to see how busy the stores are. What if those investors could see where their Equinix trades were being executed?
Now it's not clear why Citrix (CTXS) should have dropped 14% because Equinix guided revenue down by 2%, but in the selling panic, nearly 18 million shares of Citrix stock traded hands. Normally 3 million do. F5 (FFIV) saw 7.6 million shares move compared to 1.6 million on a typical day. Savvis (SVVS), which reaffirmed guidance for a quarter that's already ended, lost 10% of its value, and saw 5 million shares trade hands vs. 320,000 on an average day. And with all the noise out there still ringing in your ears about a co-lo company starting with "E", I won't mention their name again in this post.
There were some days last quarter when these stocks were being bid up for no good reason where they did 2-4x normal volumes. Savvis, for example, saw nearly 600,000 shares move on September 24th when it was up over a dollar. F5 traded 5.5 million shares on July 22nd when it was up nearly 15% for the day. Citrix was up nearly 20% on July 29th when 14 million shares of the company traded.
These sharp moves - up and down - reflect a manic psychology in many of these names, which is not uncommon for a sector that's getting a lot of attention. But the financial strength of many data center providers depends on financial trades. Savvis, for example, gets nearly 30% of its revenue from financial services, much of which is trades and market data to support those trades. So data centers should continue to do well as long as investors keep having selling panics, irrational love affairs with certain stocks, and keep building more algos. A wave of rational buy-and-hold investors is the last thing this industry needs.
As it was losing nearly a third of its value yesterday, Equinix (EQIX) saw 30 million of its shares change hands, representing nearly 70% of its float, and 40 times its normal volume. 3.1 million of these shares traded on Direct Edge, whose primary data center is Equinix's NY4, which is just across the Hudson from Wall Street in Secaucus. Many investors are familiar with retail analysts who walk around malls to see how busy the stores are. What if those investors could see where their Equinix trades were being executed?
Now it's not clear why Citrix (CTXS) should have dropped 14% because Equinix guided revenue down by 2%, but in the selling panic, nearly 18 million shares of Citrix stock traded hands. Normally 3 million do. F5 (FFIV) saw 7.6 million shares move compared to 1.6 million on a typical day. Savvis (SVVS), which reaffirmed guidance for a quarter that's already ended, lost 10% of its value, and saw 5 million shares trade hands vs. 320,000 on an average day. And with all the noise out there still ringing in your ears about a co-lo company starting with "E", I won't mention their name again in this post.
There were some days last quarter when these stocks were being bid up for no good reason where they did 2-4x normal volumes. Savvis, for example, saw nearly 600,000 shares move on September 24th when it was up over a dollar. F5 traded 5.5 million shares on July 22nd when it was up nearly 15% for the day. Citrix was up nearly 20% on July 29th when 14 million shares of the company traded.
These sharp moves - up and down - reflect a manic psychology in many of these names, which is not uncommon for a sector that's getting a lot of attention. But the financial strength of many data center providers depends on financial trades. Savvis, for example, gets nearly 30% of its revenue from financial services, much of which is trades and market data to support those trades. So data centers should continue to do well as long as investors keep having selling panics, irrational love affairs with certain stocks, and keep building more algos. A wave of rational buy-and-hold investors is the last thing this industry needs.
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