But Citrix Systems, Inc. (NASDAQ:CTXS) has a cloud strategy, and it’s an interesting speculation.
The strategy is built around a hypervisor called Xen, an open source hypervisor that Citrix re-sells. The company wants to extend this into a virtual CloudPlatform, also open source, organized under the rules of the Apache Foundation.
According to its Product Matrix, and its press statements, Citrix Systems, Inc. (NASDAQ:CTXS) hopes to be a “Switzerland” among competing cloud infrastructures, primarily those of Amazon and OpenStack. It is offering the software both to operators of public clouds and those building private clouds. It claims its stuff is better.
Whether it is or not, success depends on building a channel for its cloud offerings, a network of experts, and organizations, dedicated to re-selling and supporting Cloud Platform.
And that’s where the speculation comes in. You’re betting that Citrix will be one of the survivors in the cloud infrastructure wars. Personally, I don’t see it. I know Amazon has the current market share, so companies that support it directly, like privately-held Eucalyptus, have an opportunity. Much of the rest of the power in the space is lined up behind OpenStack, an open source operation with its own foundation behind it. This includes IBM, by the way. Then you have VMware, Inc. (NYSE:VMW) and its Pivotal Initiative. And then you have Citrix and Apache Cloudstack.
I may be wrong, but to me it doesn’t fit. Worse, I don’t see much visibility on that going forward – Citrix Systems, Inc. (NASDAQ:CTXS) is no more likely to break out its “cloud” revenues than is Amazon, in other words it won’t. What you’re betting on here is that the company can continue to profit from its existing products and draw enough buyers and builders into its CloudStack to make a success of it.
The company has executed well, growing over 37% from 2010-2012. But profit margins are a little dicey, and you have to wonder how much further the old products have to go. Sure, they could be sold through a Citrix Systems, Inc. (NASDAQ:CTXS) cloud, and it’s applications, not operating systems, where the real money will be in cloud at some point. But that hasn’t happened yet.
I have to call it iffy.
Take Care
If you have read my first two hangover stories, you have a few clues as to the nature of the cloud. It’s about the software, it’s about gaining visibility on customer wins going forward, it’s about being part of something bigger than your own operation.
At current prices, I find both VMware, Inc. (NYSE:VMW) and Citrix Systems, Inc. (NASDAQ:CTXS) to be fairly speculative, not my first choice for the cloud. I feel a little better about VMware, because I have faith in Paul Maritz, but neither is my first choice.
But if you’re interested, look closely. They might become yours. And if they do, please drop me a note and tell me why.
Dana Blankenhorn has no position in any stocks mentioned. The Motley Fool recommends VMware. The Motley Fool owns shares of EMC and VMware.
