The core business is in a challenging position after the narrow-moat company has undergone so many drastic overhauls in the last two years.
By Rodney Nelson | 07-10-17 | 07:05 PM | Email Article

On July 10,  Citrix  announced that the company had parted ways with CEO Kirill Tatarinov and is moving longtime CFO David Henshall into the vacant CEO role. Citrix called Tatarinov’s departure a “mutual decision” in a press release, marking the end of Tatarinov’s 18-month run at the helm of Citrix. The suddenness of Tatarinov’s exit gives us some pause, as we believe the core Citrix business is in a challenging position after the company has undergone so many drastic overhauls in the last two years. Citrix reiterated its second-quarter guidance, and we will maintain our $64 fair value estimate and narrow moat and negative moat trend ratings. Although shares are trading off roughly 3.5% on the heels of this news, we continue to view shares as materially overvalued.

Rodney Nelson is a senior equity analyst for Morningstar.

Henshall brings a familiar face to Citrix’s CEO role, having served as the company’s CFO since 2003, while Tatarinov was an outsider who came over from Microsoft in January 2016 amid a C-suite shakeup spurred on in part by activist investor Elliot Management. We think Tatarinov performed admirably in a challenging environment, helping Citrix strike expanded partnerships with firms such as Microsoft while navigating the company through the spinout of the GoTo family of products. While we do not expect any immediate volatility at the company stemming from this change, this is the second major leadership shakeup at Citrix in less than two years, which could potentially open the door for increased internal tumult in the coming weeks and months. More generally, we think Citrix’s core desktop virtualization business will struggle to find growth, and though the company has made a more aggressive move into new markets like application delivery controllers and security, the firm lacks a leadership position in these markets, and we do not believe they represent compelling long-term opportunities for the company.

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Rodney Nelson does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.
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