Cloud software maker Citrix to spin off GoTo business, cut jobs
Cloud computing software maker Citrix Systems Inc (CTXS.O), under pressure from activist hedge fund Elliott Management, said it would spin off its GoTo business into a listed company and cut about 1,000 jobs, or more than 10 percent of its workforce.
The company’s shares fell as much as 3 percent to $75.99 in after-hours trading on Tuesday.
Citrix said in July it would explore strategic alternatives for its GoTo family of products, including videoconferencing and desktop sharing service GoToMeeting.
Elliott in June called on Citrix to sell some units, cut costs and buy back shares to make up for six years of underperformance when the company’s expansion into non-core products pressured profit margins.
Since then, the stock had gained about 19 percent through Tuesday’s close.
“I think some investors could be a bit disappointed as they were hoping for a sale of the GoTo piece as well as ultimately a sale of the business,” FBR Capital Markets analyst Daniel Ives said.
Sources told Reuters in September that Citrix was making a final attempt to see if it could sell itself at a satisfactory valuation.
The company has market value of about $12 billion.
Ives, who values the GoTo business at $3.5 billion to $4 billion, said Citrix might sell different business units and the company as a whole could be an acquisition candidate after the restructuring.
Elliott had also called for Citrix to explore the sale of NetScaler, which helps speed up Web-based applications.
The company said on Tuesday it would stop investing in certain programs and products and shut down non-core products.
The job cuts do not include the impact of the spinoff, the company said on Tuesday.
The company said it expects about $200 million in annualized pre-tax cost savings, 75 percent of which is likely to be in 2016.
Citrix also said it would incur pretax charges of about $65 million-$85 million related to the job cuts in the fourth quarter of 2015 and fiscal 2016.
Most of the restructuring would be done in November and in January, the company said.
Citrix also said it expects a 1-2 percent net revenue growth for the year ending December 31 with an adjusted earnings of $4.40-$4.50 per share.
Ives said the restructuring was a move towards a more positive path of growth and especially higher operating margin.