(Adds analyst comments, details, updates share movement)
By Purwa Khandelwal
BANGALORE, Oct 17 (Reuters) - Business software maker Citrix Systems Inc (CTXS.O) reported a 39 percent jump in third-quarter net income based on strong revenue growth across all businesses, but shares fell 7 percent on concerns that operating margins might fall next year.
"They are accelerating their investment, so that's going to reduce their operating margin guidance," Lazard analyst Joel Fishbein Jr, who has a "buy" rating on the company, said by phone.
He expected the 2008 operating margin to fall to a 22 percent range, down from the 24 percent range a year ago.
Citrix shares have leaped 55 percent since the start of the year, during which the company has posted strong quarterly results, closed a stock-option probe and announced plans to take over XenSource Inc.
XenSource develops system virtualization technology, which helps present the resources of a single computer as if it were a collection of separate computers.
Fishbein said the market is over reacting to Wednesday's news, and the stock would continue its upward trajectory after people digest the numbers.
Net income for the third quarter rose to $61 million, or 33 cents a share, from $44 million, or 23 cents a share, a year ago. Excluding items, the company earned 41 cents a share. Revenue rose 26 percent to $350 million.
Analysts on average had expected the company to earn 38 cents a share, excluding items, on revenue of $339.9 million, according to Reuters Estimates.
The company raised its fiscal-2007 revenue outlook to $1.36 billion to $1.37 billion, compared with its earlier forecast of $1.34 billion to $1.36 billion.
The company expects earnings of $1.52 to $1.53 a share, which excludes certain items, but includes 3 cents of dilution related to its acquisition of XenSource.
Analysts on average were expecting earnings of $1.53 a share, before items, on revenue of $1.36 billion.
Last month, Microsoft Corp (MSFT.O) and Citrix shook hands to extend their alliance on virtualization, under which the companies also promised to collaborate on new virtualization technology.
"Microsoft and Citrix compete on one hand but they also have a strong partnership, and we think that this partnership will grow stronger and stronger," Fishbein said.
Microsoft is wrestling VMware, an affiliate of data storage firm EMC Corp EMC.N, to gain a firmer foothold in the virtualization market. VMware Inc (VMW.N) currently holds the upper hand with a 70 percent market share.
Citrix, powered with XenSource, could help Microsoft beat its competitor.
Shares of Citrix fell 7 percent to $39 in late electronic trade, after closing at $41.77 Wednesday on the Nasdaq.