Citrix: Xenserver could’ve been a contender
Citrix Systems, Inc. (NASDAQ:CTXS)’ virtualization hypervisor, Xen, was already open source, and it was the first product of its kind on the market. But users found a disconnect between Xen’s open source status and the fact that servers running it were proprietary. Citrix Systems, Inc. (NASDAQ:CTXS) has been trying hard to change that perception, combining its cloud assets into something called Project Windsor, but that didn’t provide much lift against open source OpenStack or Amazon.com, Inc. (NASDAQ:AMZN).
Since early last July, the stock is down about one-fourth and now trades at around $60 per share. The earnings multiple has fallen to about 30. More important, sales growth has slowed, to about 12% year over year, and profit margins are below the level they were at last year. Citrix Systems, Inc. (NASDAQ:CTXS) still has a pristine balance sheet, and it still has operating cash flow, but there are signs of trouble in the numbers.
Thus, the move to move Xenserver from something with a mix of open source and proprietary components, to a pure open source set-up, with future development to take place under the open source Xen community. This sounds great, but it’s pretty late. VMware has tied up the cloud-based “Internet of Things” through a venture with General Electric, Amazon.com, Inc. (NASDAQ:AMZN) keeps powering ahead, Microsoft has tied up with Oracle, and even OpenStack is faltering. It’s hard to see where the traction, let alone the profits, come from.
The Foolish take
When a company makes an open source announcement, look carefully at what’s happening in the market and what analysts say the announcement’s intent is.
If it’s to create a standard, to go where no software has gone before, that’s bullish. If it’s to attract investment, if it’s something that other companies also do, that’s bearish. Standardization efforts can fail, and efforts to create sales can succeed, but it’s not the way to bet.
Dana Blankenhorn has no position in any stocks mentioned. The Motley Fool recommends Netflix. The Motley Fool owns shares of Netflix, Inc. (NASDAQ:NFLX).
The article Two Open Source Strategies originally appeared on Fool.com.
Dana is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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