BANGALORE, Jan 29 (Reuters) - Shares of Citrix Systems Inc (CTXS.O) fell as much as 14 percent Thursday, a day after the infrastructure software maker forecast a surprise fall in first-quarter revenue, prompting at least one brokerage downgrade and five price-target cuts.
The company, which develops virtualization software that allows a single computer to act like many “virtual” machines, had on Wednesday also posted a slight dip in quarterly profit.
Revenue from the company’s application virtualization business, led by flagship product XenApp, fell 3 percent as customers delayed or reduced planned projects in the fourth quarter.
Deals with a value of more than a million dollars fell in the fourth quarter, as customers adjusting to lower budgets hesitated to make large capital commitments.
“We believe that the combination of slowing investments by enterprises in new applications and increasing levels of unemployment is negatively affecting sales of XenApp licenses,” Credit Suisse analyst P. Winslow said in a note to clients.
Winslow estimated an 18.6 percent fall in XenApp license revenue for 2009, and said a near-term rise in the company’s stock seemed unlikely.
He downgraded Citrix to “neutral” from “outperform” and cut the price target on the company’s shares to $24.50 from $27.50.
“We believe Citrix is swimming upstream against a very challenging spending climate, which will continue to pressure growth rates in the coming quarters,” FBR Capital Markets analyst Daniel Ives said. He cut his target price on the stock to $22 from $24.
In the latest fourth quarter, overall revenue growth at Citrix slowed to 4 percent at $415.7 million, while licensed revenue declined 9 percent to $162 million.
The company expects first-quarter revenue to fall 5 percent while analysts were looking for a 7 percent rise in revenue.
Citrix, which has been aggressively clamping down on expenses over the last few months, also said it would cut 10 percent of its workforce, consolidate facilities and reduce its contract workers.
Stifel Nicolaus analyst Scott Robinson, who has a “buy” rating on the stock, said the company’s solid profit performance, despite the revenue shortfall, was driven by its focus on cost cuts.
“We continue to believe that in the face of top-line uncertainty that Citrix will make moves to support the bottom line,” Robinson said.
He cut his price target on the company’s stock by $2 to $30.
Citigroup, Needham and Jefferies also cut their price targets on the stock.
Shares of the company fell to a low of $20.82, before paring some of their losses to trade down $1.06 at $23.13 Thursday on Nasdaq. (Reporting by Sayantani Ghosh in Bangalore; Editing by Pratish Narayanan)