Citrix Systems, Inc.
Q4 2006 Earnings Call Transcript

Published: 24 Jan 2007

[Operator:]

Good afternoon. My name is Marvin and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Citrix Systems Fourth Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer period. (Operator Instruction). Thank you. I would now like to introduce Mr. Jeff Lilly, Director of Investor Relations. Mr. Lilly, you may begin your conference.

[Jeff Lilly:]

Thank you, Marvin. Good afternoon everyone and thank you for joining us for today's call where we will be discussing Citrix's fourth quarter and fiscal year 2006 financial results. Participating in the call will be Mark Templeton, President and Chief Executive Officer, and David Henshall, Senior Vice President and Chief Financial Officer. This call is being webcast with a slide presentation on the Citrix Investor Relations website and the slide presentation associated with the webcast will be posted immediately following the call. Before we begin the review of our financial results I want to provide you with an update on some plan changes to the format of our product performance discussions, simplify the way we discuss our product performance, we have classified our products into four groupings which logically amount to the way our business has evolved. The four groupings include our application virtualization products, our application networking products, our online services and other which includes our emerging products. This classification of our products and historical revenue trends related to this four groupings have been posted to our website and David, will be discussing their performances in prepared remarks. Before we get started, I want to emphasize that some of the information discussed in this call may be characterized as forward-looking statements made pursuant to the Safe Harbor provisions of the U.S. Securities Laws. These statements involve a number of factors that could cause actual results to differ materially, including risks associated with the Company’s businesses involving the Company’s revenue growth, products, their development and distribution, product demand in the pipeline, economic and competitive factors, the Company’s key strategic relationships, the effect of new accounting pronouncements on revenue and expense recognition, including the effects of FAS 123R on certain of the Company’s GAAP financial measures, acquisition and related integration risks and a company's voluntary ongoing review of the stock-option granting practices and its related accounting. These information concerning this factors as highlighted in earnings press release and in the company's filings with the SEC, including the Safe Harbor disclosure contained in our most recent 10-K filing available from the SEC or the Company’s Investor Relations website. Additionally, during this call we will discuss various non-GAAP financial measures as defined by SEC Regulation G of certain adjusted figures which include operating expenses, gross and operating margin, operating and net income, and earnings per share. The most directly comparable GAAP financial measures and a reconciliation of the differences discussed on today’s call can be found at the end of our press release dated today and on the Investor Relations page of the Citrix corporate website. Now, I would like to turn it over to David Henshall, our Chief Financial Officer. David?

[David Henshall:]

Thanks Jeff, and good afternoon. Today I am pleased to report fourth quarter and fiscal year 2006 results for the company, demonstrating continued growth across all of our geographic segments and product areas. In addition to providing you with some of the commentary on the results I will discuss the trends in our business and review our current outlook for Q1 and full year of 2007. Before I get started I wanted to point out an item you may have seen in the press release. We announced today that the company is conducting a voluntary review of historical stock option practices. Given the intense focus on this topic this process is being managed under the direction of the company's Audit Committee. Because this is an on going review we won’t be able to provide any additional commentary until the process is complete. As a result the financial results reported today are preliminary and do not take into account any adjustments that could potentially be required in connection with the completion of this review. I do want to reiterate, however, that this work is being done voluntarily and the company has not received any enquiries from any regulatory agencies today on this topic. So let’s back to the financial results. As you see from the reported numbers we are finishing 2006 with a great fourth quarter completing a record year for Citrix and really demonstrating momentum and continued execution against our strategy. Taking a look at Q4 and 2006 financial highlights; total revenue in the period was $321 million, an increase of 19% over last year. For the full year, the company posted almost 25% increase in revenue, exceeding $1.1 billion. Our adjusted EPS was $0.39 in Q4 and $1.40 for 2006, representing growth of 8% and 19% respectively. Adjusted operating margin was 27% for both the quarter and the year, and cash flow from operations was nearly $100 million during the quarter and over $320 million for the 12 month period. So, overall a very strong quarter performance. Next what I would like to do is cover some of our achievements in 2006, and how we did relative to our goals and objectives for the year. The four product market areas that I would like to review include, first; our application virtualization products and the steady growth we have seen in this area. Second; the company's success delivering software as a service/ Third; our work to establish Citrix as a leading player in the app networking market. And finally, the pipeline of emerging products and technologies that we've built to help fuel future growth. These four product reviews are the best way to think about our product offerings and core requirements for the app delivery markets. This is a logical organization because of the way we are leveraging common technologies, addressing specific buyers and solving related problems for our customers. So, first let me focus on the app virtualization products including presentation server in the Access Suite. These were 11% in Q4 to $245 million in revenue. This includes license growth of 2%. For the full year, total revenue of this business grew 12% and licenses increased by 4%, within our target range for these products. Customers are continuing to renew their software subscription deposit rates, over 80% in Q4, and others are making conscious purchase choices to get [current] as they realize our vision of app delivery, a good indicator about viewing Citrix as a strategic solution provider. In fact, PS4 has become our most rapidly adopted product to date, and we continue to see customers migrate to our newest release, demonstrating the value of this platform and our continuing innovation. Next, regarding our on going success, delivering software as a service. Our GoTo products continue to meet the needs of customers in this rapidly growing segment of the market, which demands secure, affordable, fast and easy software as a service offering. Revenues from these products reached almost a 150 million for the year, yielding an annual growth rate of 50%. During the second half of the year, we launched our fourth offering in this group GoToWebinar, which has already received awards and accolades including being named the Best New Web Conferencing Service for 2006 by Frost & Sullivan, and winning the LAPTOP Magazine Editor’s Choice award. Our continuing pace of innovation should allow us to help drive further gains in the markets for web-based application sharing technologies. The third area I would like to highlight, is the progress we've made in establishing Citrix as a leading player in the app networking market. In Q4 our app networking business which consists of NetScaler, WANScaler and the SSL VPN products generated 32 million in total revenue, an increase of over70%. For the full year, we delivered well over a 100 million in revenue from these products and services in this category. We've expanded our addressable market opportunity by entering the rapidly growing space of WAN Optimization and Acceleration. With our new WANScaler line of products, which are to be formally launched at the end of this month, we are literally just scratching the surface of opportunity in this area. According to industry analysts, Citrix has firmly established itself as a leader in the web app delivery and SSL VPN magic quadrants. And we’ve already been placed in the visionary quarter through WAN Optimization. So we are extremely excited about the opportunities in this phase, and believe that we are well positioned for strong growth. The final objective from last year was to build a solid pipeline of emerging products and technologies to complement our existing solutions and to help fuel future growth. On the acquisition front, we added EdgeSight for application performance monitoring, WANScaler, as mentioned, for addressing the app delivery in branch offices and other remote locations, and Ardence for extending desktop delivery in a real time or less. Additionally, technologies coming to the market in 2007 from our internal R&D efforts will include applications streaming, Project Kent for workforce continuity services and Project Trinity for desktop delivery. And in total, we are proud to have delivered these results and achievements for 2006, and how we did relative to our goals. Mark will judge some these items in a little bit more detail during his comments. When we look at revenue by geographic segments in the quarter, the Americas grew 20% year-over-year to a $139 million. This growth was fueled by both the app networking products and by strong demand for customers upgrading the PS4. EMEA was up 8% over Q4 last year to a $112 million. This was a slightly slower growth rate than normal, due to the end of sale program for MetaFrame XP which took place in EMEA during Q4, 2005 and created a top year-over-year comparison. The Pacific region grew 33% highlighted by strength in emerging market and early adoption of our app networking solutions. And finally online services, which are not included in these geo segments grew 50% in the fourth quarter, I mentioned earlier. Now, let me talk briefly about expenses and operations. Adjusted OpEx during Q4 was $230 million, up about 23% year-over-year and 14% sequentially. The annual increase was driven by several factors including the OpEx associated with recent acquisitions, ongoing headcount growth, and marketing programs. Specific to the G&A line however, in Q4 we incurred some expense related to a change in plan for the development of a new campus in Santa Barbara. This required us to expense certain cost that previously been capitalized amounting to a few million dollars. Regarding headcount growth, we ended of the year with over 3700 employees, up about 110 people in the fourth quarter. The largest increases were the sales and services team, focus on app networking and support. On the balance sheet, deferred revenue growth record $42 million sequentially, bringing the total of $356 million up 25% from last year. The driving factors here included existing customers' line upgrade and the ongoing success of our subscription advantage program as I reviewed earlier. Our AR balance was just over $200 million at the end of the quarter, yielding a DSO of 57 days. This nine day increase in DSO from Q3 is mainly attributable to the record growth in deferred revenue during the period as well as the strength in bookings throughout December. Looking forward, I would expect DSOs to be back in our target range of 45 to 55 days this quarter. Also as I said earlier, cash flow from operations were great in Q4, coming in at nearly $100 million. Our primary use of cash during the quarter was to fund our ongoing stock buyback program. In total, the company received 3.6 million shares valued at about a $100 million during Q4. Through summary, I am really pleased with the results for the fourth quarter and for all of 2006. The company has delivered consistent growth in all the important financial metrics, plus still balancing significant investments in the new business and the routes to market that are important for long-term success. While many of our investors are still in their early stages, I believe that we created a solid foundation to build on this year. Finally, I would like to discuss our current outlook and expectations for the first quarter and full year ending December 31st 2007. As we noted that we are about make forward-looking statements that incorporate certain risks, so features for the Safe Harbor statement noted in our press release and the rest that are stated in our SEC filings. As a reminder, in 2006 we began recognizing stock-based comp under FAS 123R, while this number will be included in our GAAP results. It will be excluded from our adjusted results. But for the first quarter, we expect total revenue in the range of $298 million to $308 million up which we expect online services to contribute plus $44.5 million to $45.5 million in revenue. Adjusted gross margin should be in the range of 92% to 93%, interest income up approximately $11 million weighted average shares between 185 million and 188 million and finally, we expect earnings up $0.24 to $0.25 on a GAAP basis and adjusted EPS up $0.34 to $0.35. For the full year 2007, we expect total revenue in the range of $1.29 billion to $1.31 billion, GAAP EPS of $1.14 to $1.19 and adjusted EPS of a $1.51 to $1.54. So now I'd like to turn it over to Mark to give you some additional details on the quarter's performance and discuss our ongoing businesses. Mark?

[Mark Templeton:]

Thanks a lot David. We had another extraordinary fourth quarter and a strong finish to an outstanding year of growth. We built excellent momentum across the business and I believe we are entering 2007 with by far the strongest products, channels, technology pipeline and brand we have ever had. I am pleased to report that Citrix is in great shape for continued growth and for developing the application delivery market from the poll position. Exactly one year ago we shared our financial goals with you, top line growth, expense management and driving revenue diversity from newly acquired products, software to service, license updates and products upgrades. Today, I am extremely proud to say we delivered. We are reporting 25% revenue growth over $1.1 billion for the year and 19% growth in adjusted EPS of $1.40 and impressively 19% growth in product licensing. That’s almost double the 2005 growth rate and our best in five years. In 2006 we also on-boarded over 550 new employees and completed three strategic acquisitions reflecting software, Orbital data and ordnance. These new employees bring us talent, experience and deep domain expertise in some of the fastest growing areas of our business, and our acquisition significantly add to the application delivery capabilities we can offer our customers. Consistently strong execution across strategic operational and financial dimensions is a must, and 2006 was no exception. Before looking into our 2007 plan, I'd like to spend a moment acknowledging a significant business milestone for us, exceeding $1 billion in revenue. Achieved by less than two dozen software companies in all the history and the level that even fewer have been able to sustain. I am extremely proud of this '06 achievement, exiting the year well above the mark. As David mentioned in the guidance, we are driving to exceed $1.3 billion in 2007. When we established this goal over four years ago, it meant we would need to double our revenue. More importantly, however, it also meant we would have to double down on building new competencies in strategic planning, innovation, M&A, building scalability, and nurturing our culture. While it's only a milestone in our history, it does underscore our strength and execution. Our ability to meet the goals we set and our commitment to invest in technologies that will make our customers successful. So now I would like to turn your attention to looking forward into 2007. Our app virtualization products saw the industries goal standard and provide a solid foundation for us. Our app networking products have really skyrocketed to the forefront of the application delivery market. And our software the service offerings continue to expand with the 2006 launch of GoToWebinar. As we amplify our messaging, one of our key areas of focus will be to make application delivery a top strategic priority for our customers. We laid out this vision at our annual iForum conference a couple of months ago. We will be doing the same for our business partners next week in Orlando during our Annual Partner Summit. Application delivery is a profoundly strategic message and opportunity for Citrix. Why? Because infrastructure for application delivery is the core enabler to a world where anyone can work from anywhere, that’s our vision and I strongly believe it’s a business imperative, driven by the dynamic forces of globalization, business disruption, industry consolidation, government regulation and echo boomers, all very significant drivers of our growth. Fact is these dynamic forces have changed are creating much more distance between users and applications, dramatically increasing the degree of difficulty of delivering applications over the network for IT organization. So every IT organization needs the enabling infrastructure to optimize a delivery of every type of application web apps, client-server apps, desktop applications as well as voice and video applications. They need an innovative service oriented approach that de-couples users, networks and applications and then dynamically re-couple them into systems to support new work styles and enable an infinite number of business scenarios that require an on-demand connection between an applications point of origin and the user's point of access. Our complete range of infrastructure offers the dynamic coupling that allows business change, on-demand by delivering applications to users anywhere they work, with the best performance security and costs. In 2007, to execute on this vision we are focusing on six of our premise-based products that we believe are strategic to application delivery. Presentation server for delivering Window's based client server and desktop apps; NetScaler for delivering any type of web application; Access Gateway for securing access to applications. WANScaler for accelerating branch office application delivery; EdgeSight for real-time application performance visibility and the new product based on project Trinity for delivering the best windows desktop experience. By streamlining and aligning our products in more consumable ways. We expect to drive further growth in our install base and address new greenfield opportunities. Now we won't be making any official product announcements today, saving them for next weeks summit and the rest of Q1. As a preview, however, and good example of how we are driving further growth in our install base, is the introduction of a new premium edition of presentation server. This edition will replace the access suites at the same price point and offer more value at the same time. Additionally, branding it as a presentation server product, we will make it easier for our customers to buy and our partners to sell. And it will also increase the ASP of the overall presentation server product family. You will hear more about this later in the quarter. An example of a greenfield opportunity we are really excited about is that dynamic desktop initiative, which takes aim at a market that leverages our existing technical and go-to market competencies in virtualization and streaming. Dynamic Desktops are centrally delivered windows desktops hosted in the data center. The benefits for IT include cost savings, data security, flexibility, manageability, and overall accessibility everything IT needs today. Meanwhile, office workers enjoy a great windows desktop experience. While avoiding many of the traditional disadvantages like theft, viruses, extended downtime, or having the rebuild preferences after a research cycle. This is particularly timely, as many customers consider their plans for migration to Windows Vista. The market is expected to be significant, with Gartner estimating over 30 million hosted virtual desktops by the year 2010. To address this market, we will be introducing a new product for delivering virtual desktops, based upon a project we codenamed, Trinity. From a competitive prospective, it will be the only product that supports all three types and styles of virtual desktops. Based on first; the terminal services; second, virtual machines, and third, blade PCs. This approach gives customers the flexibility they need to deliver virtual desktops to the widest array of office-based workers at the lowest aggregate cost. And we began to offer some of this capability in Q4 by making the desktop broker feature available to presentation server customers. The early response has been amazing and I believe we will see a tremendous number of desktops delivery private projects in 2007, with significant implementations starting in 2008. Recently, we closed the acquisition of Ardence, giving us fundamental IP and 100 talented employees. Ardence pioneered screening technologies, design for on-demand provisioning of operating systems. We believe this acquisition will advance our competitive position in the desktop delivering market, allowing us to do for Windows desktops, what we have done for Windows applications. As the only company that can both virtualize and stream Windows desktops over the network. Ardence technologies will also include the manageability of our overall app delivery system and open doors to deeper industry partnering opportunities. We will be integrating the Ardence team over the course of the year, operating the unit as a separate business within our management systems group, all while we channel ready the products, leverage core technologies across other product line and grow the embedded software part of the business. These are a couple of examples of how we are simplifying, analyzing our product offerings for future growth. In Q1, and over the course of 2007, we have quite a few product launches that leveraged the best product pipelines we’ve ever had, building on the Q4 momentum that David discussed.. Net- net, 2007 promises to be another exciting year. So, as we enter 2007, here is what to expect from Citrix. First, we will begin to put application delivery on the radar screen of every enterprise CIO. Second, we will focus on our six products, most critical to successful app delivery, particularly in our installed base. Third, we will expand go –to-market capacity and application networking and at Citrix Online, specially international. Fourth, we will improve operational efficiencies to insure our scalability as we continue to grow. And fifth, we will continue our relentless focus on attracting and retaining the best talent to build a world-class company. I firmly believe, we have a sustainable business and technology platform on which to build. I am bullish about the relevance of virtualization of streaming, of sharing and optimization of desktops and apps. Especially considering the very dynamic business environment that will be the hallmark of the next five years. Our pace of investments and our vision for application delivery has put us in an amazing position. So I would like to thank every Citrix customer, every business partner, every employee, and every family member. You are the best of the best, and I have never been so proud. Now we will open it up for questions.

[Operator:]

(Operator Instructions). Our first question comes from the line of Steve Ashley with Robert Baird.

[Steve Ashley:]

Congratulations on a solid quarter. Hey David I would just like to get me a little bit more color on the guidance for the first quarter in this -- and for the full year. May be you could talk about, when we look at the core virtualization, presentations over business, what kind of license growth you might be baking into your expectations?

[David Henshall:]

Yeah. So right now I think that, while I don’t want to get in to the habit of giving product by product guidance, specially given the way we are -- we are going to be thinking about the business a lot going forward. But I will say, because I know it’s a pretty big focal point right now that, for the virtualization businesses which include presentation server and the access suite, I think that consistent with what we have thought going into Q4, we were flat to down a few percentage points would be the way to think about it in Q1. And we think the business and the changes we are making in that product line are extremely powerful, and it’s being done at the right time. But given the effect that we saw from the end of sale of XP in the Americas and Pacific region in Q1 last year, I just think we’ve got a really tough comp to overcome. So consistent with what we thought going into Q4, I carry that forward into Q1.

[Steve Ashley:]

And do you anticipate the application networking group to be profitable in the first quarter?

[David Henshall:]

Yes, I would. I think that, in general it’s getting much more challenging to break that out, because we have integrated the go-to market activities, we've integrated the G&A in operational activity so, there is not a discreet P&L across product groups right now. However, based on our regional modeling that we have done through the various acquisitions, I would expect it to be breakeven or profitable in the first quarter.

[Steve Ashley:]

Great. And lastly Mark, you have been fairly active in terms of acquisitions in the past two years. How should we think about this year 2007 relative to your M&A activity of the last two years?

[Mark Templeton:]

Steve, I think -- basically no change in our past year, looking forward I think we are doing well, absorbing the acquisitions from the last two years, we are getting better and better at it, so there is some learning curve that’s benefiting us here. At same time there is a huge number of opportunities -- mainly in greenfield sort of technology spaces and places that -- things that we think fit our business is pretty well, so nothing huge but similar types of things that we've seen in the past.

[Steve Ashley:]

Great thanks so much.

[Mark Templeton:]

Thanks Steve.

[David Henshall:]

Thanks Steve

[Operator:]

Our next question comes from the line of Phil Winslow with Credit Suisse.

[Phil Winslow:]

Hi guys great quarter, Dave, I just have one question on the G&A line you mentioned some sort of one-time expenses there, how should we think about that Q1 and what's sort of assurance we back out of there not ongoing here?

[David Henshall:]

Yeah, there is a -- there's actually a lot of difference things going on in Q4, it's hard to call out, things that are non-recurring because there is always something that happens in every quarter that's unique to that period but I must say that, when we talked about -- the Citrix Online facility, that was one that I wanted to call out because it was between $3 and $4 million and that was just essentially a decision that we made given the increasing cost and complexity around -- building from the ground up and so we have got a great new alternative there, that’s will allow us to expand in a much more rapid pace, get people in to a new facility faster but not have to build it from the ground up. And ultimately it can end up being a lot cheaper in the long run. So that’s just a more detailed explanation about that lien item. There is also unique costs associated with both the stock option work that I mentioned in my prepared comments and a few other things. So I think that on a go forward basis you should expect G&A to certainly come down on a sequential basis, and be more in line with the percent of revenue that we saw throughout 2006, excluding Q4.

[Phil Winslow:]

Yeah great and then also, you just had Orbital Data for a few months this quarter, just sort of wondering what that contribute to the [NG] line?

[David Henshall:]

Well inline with what our original expectations when we talked about $1 or $2 million, the products really haven't been launched they are being launched, there Summit event which is occurring at the end of this month and that great early feedback interaction across the partner and customer network so stay tuned.

[Phil Winslow:]

Great. And then just sort along these lines when I guess backing your WANScaler at a Q4, that would have put you guys up couple of million 1 or 2 million sequentially on the NetScaler side just wondering what trends you were saying there in Q4 I think different than previous quarters and then I'll just go back into the queue?

[David Henshall:]

Well I say no unique trends in Q4 I mean the business overall was up 70% year-over-year, I think we are extremely happy with that, on of the those things given the historically the internet-centric bias of that business, we always see Q3 as a really big quarter and we saw that sequentially and that’s because a lot of those the capital pushed in cycles for that business is really focused around the September quarter as they prepare for the holiday shopping season and the seasonality that they see. So I think we'll always see a pretty good, pretty good bump there. However, as we add more and more in the enterprise side and that begins to dominate the mix over the future quarters. I would expect to see -- probably a higher ramp into the fourth quarter and then more of a seasonal down in the first quarter but it's still early days for us here.

[Operator:]

Our next question comes from the line of Ed Maguire with Merrill Lynch.

[Ed Maguire:]

Yes. Good afternoon. Could you talk about the concentrates of large deals in the quarter again roughly what the, what the average size was of the top ten?

[David Henshall:]

Sure. We had a 90 it was actually in the quarter that were they were over 1 million about five of those were in the EMEA market, two in North America and two in Pacific. So overall, a lot of big deals. No one major deal that stood out as being more than a couple of million. So I would say nothing terribly unique in the quarter consistent with what we'd expect in the any fourth period.

[Ed Maguire:]

Were any of those from the application networking group?

[David Henshall:]

No they weren't. The application networking group, when we talk about this, we generally talk more in terms of individual peers or transaction. What we see a lot in that business is just ongoing steady purchases from a lot of the larger customers. However, if you would aggregate those up, we generally have more that would fall in to the seven figure category.

[Ed Maguire:]

Okay and on the deferred revenues you had pretty healthy sequential growth there and you talked about fairly healthy renewals was there could you quantify at least qualify the impact of any getCurrent activity during the quarter as well?

[David Henshall:]

Yeah I think we're seeing really great success in getCurrent particularly in the North American markets and it’s important to point out that getCurrent has really broken down into two individual focus areas. One is really the customers that have -- have left their subscription last for less than a year, that’s really what getCurrent is about getting them current on that program, so that they can participant in the future versions of the products. And that we saw -- real solid progress there or finally copy into that huge install base that I talk about each quarter those, millions and millions of licenses that customers have bought that aren't currently on active subscriptions, so I think that’s a big opportunity. The other section of getCurrent is really about upgrades, that’s about customers that, either never had subscription or had let or laps well over a year and that’s another area that we saw a great success in the fourth quarter. Actually, selling back into the installed base, selling upgrade and getting people really up and running on the most recent platform of the products, so across the board really good performance.

[Ed Maguire:]

And just finally, could you comment on the proportion of sales in the virtualization group from act the access suite and access essentials?

[David Henshall:]

No, actually I don't have that in front of me. We really don't look at the products in terms of individual ones, I look at them much more in terms of the product family, because it’s really a -- it’s an overlapping event diagram. Our overall strategy is to certainly move more and more of concentration to the -- into ASP products to generate a higher value proceed. And I think that some of the changes that we are making this month as Mark alluded to is going to really help that going into 2007.

[Ed Maguire:]

Thank you very much.

[Operator:]

Our next question comes from the line of Kirk Materne with Banc of America.

[Kirk Materne:]

Yeah. Thanks very much. I will echo my congrats. I guess just, Dave maybe following up on Ed's question just in terms of app virtualization business and some of the bigger deals. Do you see those deals getting larger due to an increase in seats these days or an increase in sort of the value of the seat, meaning do you see more and more of your larger customer's transferring on to the suite or are they just simply expanding their usage?

[David Henshall:]

I think overall, the primary trend continues to be just a broad penetration, as we have enhanced the products, we have talked about each and every quarter, broadening applicability of the solution, radically changed the economics of the solution and just made it much more compelling value proposition for customers to deploy on a wider basis, so no real trends in terms of industry or customer concentration. We are seeing growth in the suite, suite certainly grew year-over-year and that helps out to a minor amount, but right now it's really about unit growth and just continued adoption of the overall solution.

[Mark Templeton:]

Kirk, its Mark, I will add to that and that is this premium addition of presentation server is really designed to get those customers that have been expanding with the enterprise addition mostly to -- actually take a look at the deeper value and the end of application delivery capabilities for windows apps within the big install base of presentation server enterprise. So we think that can give us some uplift in the ASP and obviously give us a deeper relationship with the customers at the strategic level when it comes to windows based application delivery.

[Kirk Materne:]

Okay, and just second and final question is actually on a Citrix Online. David, could you give us, maybe just some I guess qualitative, I guess metrics around how Citrix online is doing in terms of renewal rate trends or op margins, that business continues to be sort of on a quarterly basis to us, kind of interested to see what's going on there is it more people taking on more products in that group or is it simply just better execution just kind of interest in renewal rates and op margins specifically?

[David Henshall:]

Well a couple of things, one op margins we do break that segment out because it is fairly well contained. This quarter is consistent with what we have seen in the past if you exclude kind of that one-time charge related to the building, maybe it generating profitability in the mid-20s, so extremely profitable still. But just overall I mean we are extremely happy with the continued execution that came in Santa Barbara, growing what was already a big number another 50% year-over-year. So, the highlights there were GoToMeeting and GoToWebinar which are really contained in the GoToMeeting family growing well over 150% year-over-year and now contributing about 25% of the overall product revenue in that group, so just strength across all of the products.

[Mark Templeton:]

The thing that I would add is to point out that it’s a vast market that’s continuing to grow enormously and in terms of total opportunity and this team is excellent in execution within that context of the marketplace. And then obviously introducing new product like GoToWebinar that are innovative, changing the game, etcetera continuing to support great growth rate and great profitability.

[Kirk Materne:]

And do you see that growth rate being supported by you all expanding the market or actually taking some share from competitors as well?

[Mark Templeton:]

Yeah both I think both I think depends upon the product of course, because we are three sort of core products basis within our online services. But I would say both and the pie overall if you look at all the other players in online services they are all growing nicely as well just becoming much more accepted way of doing business, online meetings, Webinars, working remotely -- these are all the capabilities in supporting people remotely, these are all the capabilities that a dynamic world is going to require. So we think that we are in really good shape there.

[Kirk Materne:]

Right, thanks very much.

[Mark Templeton:]

Thanks, Kirk.

[Operator:]

Our next question comes from the line of Adam Holt with J.P. Morgan.

[Adam Holt:]

Good afternoon. My first question is on the application virtualization group. Plus 2% in the quarter, actually looked like it accelerated from may be a little bit of negative number in the third quarter. Could you may be drill down a little bit on the factors there, you had a tough comp in the presentation server side obviously? Was it the contribution of the direct sales organization, was it EOA activity, obviously you had a good large deal number. May be give us a little bit of clarity there, and then rolling over to the quarter if we could talk about kind of flat to down presentation server. What are the implications there for the broader application virtualization groups?

[Mark Templeton:]

Well, Adam, this is Mark. So within the app virtualization business, I think that the growth there, even though the comp was tough, was pretty broad based as a matter of fact both in new licenses as well as the contribution from the kind of get current programs that David talked about a little bit earlier. So, nothing particularly remarkable, North America just had a slamming, that’s the word we use around here Q4, and congratulations to the North America team, Al Monserrat has done a tremendous job of rebuilding that team over the last three years, and '06 was a stunning performance for everyone on that team. So, I think that’s how I’d characterize it. And I think that as we look at what to place in the quarter with a lot of customers coming back to either a get back current on their subscription or to upgrade as part of that program, we are really encouraged by the moves that we will be announcing later this quarter to really formalize that kind of process with incentives or channels, for our own sales team, as well as demand generation programs that are really going to go back into the installed base in a much more systematic way.

[David Henshall:]

And Adam let me add, I just want to clarify something regarding 2007. When we talk about the Presentation Server business, that is Presentation Server and Access Suite together, and that’s really what makes up the application virtualization group. And it was the group and the products that grew 2% year-over-year, not the individual product. And when I made comments about looking forward, I think that we were going into Q1 with the same posture we had going into Q4, in terms of it being flat down a few percentage points, just a comment about the tough comp we see on a year-over-year basis.

[Adam Holt:]

And just one more question, if I could, about the outlook for the year more broadly. Obviously I know you are not going to drill down on the product level, but is it possible to give us may be general sort of growth expectations either positive, negative or flattish for that group for '07. And then secondly if you look at the operating margin or this would imply operating margin for '07 on the guidance that you did give top and bottom line, not a ton of operating margin expansion, you are taking on some acquisitions. How should we be thinking about margins versus growth on a going forward basis?

[David Henshall:]

Sure. I think that’s specific to the app virtualization business, we continue to target this in the low to mid single digit growth range, consistent with what we’ve said for the last few years, and even with the outlook for -- the current outlook for the first quarter we believe that that’s the target range for the full year. I think if we look at the operating margin, that's included in our guidance right now. I’d point you to our in a standard range of mid to upper 20%. We always put that out there with -- the idea around that we’ve been able to produce and demonstrate, top quartile profitability in our peer group, but also have the discipline to continue to invest, very focused in terms of long-term growth of the business, and what we need to do to, to really build out not only the product sets, but also the go-to market channels for the new and acquired businesses. So, we will be balancing both going into 2007, but our -- maintaining a very consistent approach of mid to upper 20% op margins as our target range.

[Adam Holt:]

Great, thank you.

[Operator:]

Our next question comes from the line of [Brain Essex] with Morgan Stanley.

[Brain Essex:]

Hi, good afternoon. I just had a question on the virtualization. Do you have any sense for us to look at besides that the coming product cycle for that group. How we should look at these analytics with each other, any uptick or schedule of like, and support for certain products, and kind of building our expectations not just for flat to down for Q1 but for the remainder of the year as well?

[Mark Templeton:]

Brian, I don't think there are any catalyst in '07 for like end-of-sale programs that you might point to. I think the bigger catalyst were -- at our app virtualization products in '07 probably have more to do with the introduction of Vista, and the introduction of Office 2007. On across sort of both dimensions they create demand in a very natural way for delivering applications sort of independent of the desktop -- the version of the desktop operating system. So we really, those products really make a rolling out on Office 2007 upgrade a much-much easier much lower cost than the alternative with some of the new technologies we'll be including in with Presentation Server, which we'll be announcing it will make it even easier. I think those are more of the catalyst to growth for our app virtualization business in '07 than any, any sort of end of sale, end of life kind of support program.

[Brain Essex:]

Okay. And any metrics around that businesses as we look at the virtualization server group, any metrics you can get our arms around in terms of installed base or average selling price or attach rates that we back on a go-forward basis to in excess of our rest of that business?

[David Henshall:]

Well, not on the metrics in terms of ASPs, we talk a lot about installed base and that includes both people on active subscription and the people that are on either expired or no subscription. And the overall, we are looking at a number -- just a broad number but active, somewhere north of about $10 million in current users in that product line and people that have -- had expired subscription probably in the range of about 6 million overall. So I mean that the base that I talk about each quarter in terms of that real hard target opportunity in terms of going back end and either selling that a getCurrent type thing. To get them back on to the Subscription Advantage Program or really just been in target, key customers for potential upgrades just we migrate more and more powerful versions of the solution.

[Brain Essex:]

May be in terms of how that, active subscription in its expired base has grown, I guess versus last year?

[David Henshall:]

Well, they've both grown, very substantially as we ship several hundred thousand units each and every quarter. Overall, if you look at our renewal rates over the last few years, as we've probably been doing in our customer care teams, the programs around that, we have been able to increase the renewal rates of the program from mid 60s a few years ago up till now in the low 80's so we continue to make very, very good progress there. I think that over a longer term, I would like to see renewal rates approach 90% which I think is attainable for in more mature enterprise in software products and I think that’s while we won't get there in straight line, that allow a good people in programs working on it and over the next couple of years out we tend to close.

[Brain Essex:]

Okay, thank you very much.

[Operator:]

Our next question comes from the line of Jason Kraft, with SIG.

[Jason Kraft:]

Thanks. One housekeeping question, unless I missed one of the supplemental is there a pro forma breakdown of the op expense via an extra stock comp?

[David Henshall:]

I am sorry. Can you repeat your question?

[Jason Kraft:]

Yes. Is there a non-GAAP breakdown in the R&D sales and marketing and G&A.

[David Henshall:]

No.

[Jason Kraft:]

That’s include the FAS 123, is there supplement I'm missing that may have been posted on the website.

[David Henshall:]

Yes, on the website.

[Jason Kraft:]

And I guess the question for Mark, from just a high level. If you guys doing the DDI, VMware [pushing] VDI and what today's results from the EMC and VMware from a total revenue perspective, pretty much rivaling that of your core business. Can you just touch on the threats you see from them and also the opportunities to work with them, as you move to 2007 and '08 as this whole virtual desktop market starts to take off?

[Mark Templeton:]

Well, we definitely see them much more as a partner than a competitor and see them as actually very much part of our Dynamic Desktop initiative. Obviously, they work at the virtual machine level kind of and which is by the way of course there is a tremendous growth and they have done a tremendous job there at the logic tier and the data tier in the data center and they've done tremendous job there. At the user tier -- very different and that’s really our specialty and where we are strongest and therefore where we have a strong partnership with VMware across a lot of dimensions and including the DDI program where we are getting off the ground, so I think that’s the way we look at it. And then at the user tier when it comes to delivering desktops there are tremendous number of technologies that are outside of the machine itself and being able to virtualize the machine in order to be able to deliver the kind of desktop experience that’s going to be required for end users to accept this sort of way and style of using a windows desktop, and that’s really our focus and we have great opportunities to add lots of value there. And which we will we will start to later in the year et cetera. So Version 1.0 you'll see announced here in the next few weeks on our based on project Trinity and then we have more coming in that product line over the course of the year and as the market starts to build. So really I think it’s very complementary working with them and obviously we've worked with and our goal is to work with all the virtual machine vendors because this is a hot space adds lots of value got a great partnership in that area with Microsoft a new and growing partnership with the guys over at ZEN, so we are optimistic about partnering with all of them.

[Jason Kraft:]

Great, so just come where the question goes to just -- your partnership with Microsoft Virtual Server that coming out in the next several quarters, just we will kind of fine line again you have to walk there when you bought a biggest VMware?

[Mark Templeton:]

Well, I mean in the end the customer makes the decision and I think obviously the value in virtual machines and the high provider is going more and more and more toward the management of these things, not in the -- the high provider itself is being commoditized. So, in the end the customer makes that choice and we will look at the management systems that by the way we will plug into in and leverage. We are not building Virtual Machine Management Systems by any means which is really the core business that Microsoft's in VMware and others have to establish their value, so we will just let the customers, kind of decide on that one.

[Jason Kraft:]

Thanks.

[Operator:]

Our next question comes from the line of [Brad Leal] with Jefferies & Co.

[Katherine Egbert:]

Hi, good afternoon, this is Katherine Egbert with Jefferies. A couple of quick questions Dave, on the renewal rates, you said that you think overtime you get to 90%. Do you expect to see uptake in -- people getting current in front long horns in particular?

[David Henshall:]

Well, right now I think that -- when I look at the primary reason why people get current or why they have lapsed on reserve and other. I mean the number one reason historically has been that, we just haven't reached out and be able to touch each and every one of the many thousands of customers. And so I think that a lot of our success is attributable to just much more mature programs, much more dedicated focus on the overall effort. The other value is just we are producing a ton of innovation on a regular basis. We are putting out new products that customers can demonstrate, are aligned and a lot of economic metrics around, such that it pays for itself very, very quickly. So, I don't know if it's really been impacted that much by external factors, but I really believe it's been impacted by internal factors more than anything else.

[Katherine Egbert:]

Okay. Do you have any metrics that you could share with us to give us an update on your success of selling the gateway products into the presentation server install base?

[Mark Templeton:]

No. We are not breaking those out but it's just been a tremendous success. I think David mentioned in his comments the awards and the place that we have ended up in the Annual Analytics by Gartner and Forester which are based upon the market research that they do with all the vendors across revenue and unit volumes, market shares and forward growth mass. So, I think we clearly exited the year with number two market share, no matter who you ask and how you measure it. And that’s basically going from zero to number two in the market in 24 months. And being acknowledged by the analysts that really followed us from a product perspective, as a visionary and execution leader, which is exactly where we want to be. So, I think those were the -- those probably the metrics we can talk about.

[Katherine Egbert:]

Okay and I just wanted to confirm the tax rate for 2007 in your guidance. Are you still using 25% or are you going with an increase like you talked about last quarter.

[David Henshall:]

Well, right now we are talking about 25% to 26%, which is were based on about the 24% or so that I talked, that we closed it for the full year, this year I think is a reasonable expectation at this point. Now, I will point out if you remember, it's really going to be predicated on the geographic mix in the single biggest factor. Hence, we are looking for lot of success coming out of the app networking business and Citrix Online and other things that up to this point certainly have a higher concentration in North America versus the other markets. So yeah, short answer, I do think that 25 to 26 is a right way to think about it right now.

[Katherine Egbert:]

Okay. Thank you.

[David Henshall:]

Thanks Katherine.

[Operator:]

Our next question comes from the line of [Fred Grype] with Goldman Sachs.

[Sarah Friar:]

Good afternoon, it's actually Sarah Friar here. Good quarter, guys. Just going back to the A&G growth, I around focused a lot on presentation server for obvious reasons, within application networking did you see an ability to start penetrating more enterprise class customers versus what's being more a traditional internet spike and I ask that because, as I think if your competitive environment, I think you need to show that ability to take those products into your core base.

[Mark Templeton:]

We agree Sarah, and the answer is yes, we did see that across a couple of dimension. So, we exited the year with a net of about 360 retail partners, go-to-market partners that are actively working our NetScaler. Well, all of our app networking products for the most part, even though some of them are just now being introduced. And the transaction rates, we saw more enterprise transactions during the quarter. But we are really pleased with the progress we have made. We got a ways to go, but I am very pleased with the enterprise progress that we made in Q4.

[Sarah Friar:]

And so is it reasonable, I know, you have talked about kind of 40% year-over-year type growth rate for that business. Is that so kind of the targeted rate we should think about or anything that kind of moves in either way?

[Mark Templeton:]

No, I think it was wrong, the growth rate you have talked about are been able to exceed the growth rates of the underlying markets, which are either in that 30 to 40% range. So, going forward we certainly expect that we have the grow faster than the market. And one other thing that allows us to be at the high end of that range would certainly be continued traction and execution into our couple of hundred thousand enterprise customers that we currently have as installed base. So, I think, there is a quite a few catalyst there, and lot of the summer events coming at the end of month, is around training and education, and just making sure that we are broadening the message as much as possible and giving a feel to the channel partners, the capabilities to be very, very successful in this market.

[Sarah Friar:]

Alright.

[David Henshall:]

And Sarah the other thing, and I guess significant and probably the biggest single investment we are making in the business in ’07 on GoTo market side at least is really up leveling the total capacity of our GoTo market capability, especially internationally for all of our application networking products, which is where we have been weakest, just from a capacity perspective. So, that will be a huge catalyst along with the introductions that we have slated for later this quarter and that we are pretty excited about. And we will be talking by the way about all of these things in detail during our financial analyst day in, I think it’s the first week of March.

[Sarah Friar:]

Got it. Other quick one for you David if you don’t mind, just on the buyback given the pending options investigation, does that preclude you from going back to do buyback at this point in time or should we expect that sort of buyback rate to continue over the next couple of quarters?

[David Henshall:]

No, I think that. You know us, I mean we are always going to operate in the most conservative posture possible. So we will impose a self imposed blackout window until that’s wrapped up.

[Sarah Friar:]

Okay, fair enough. Thank you.

[Operator:]

Our next question comes from the line of Dino Diana with UBS.

[Dino Diana:]

Hey, guys, thanks, nice quarter. From a getCurrent perspective, adding some comments around it. But could we assume that it was in the 12 millionish range from a bookings perspective. And do you have any more, or would you say, I guess increased visibility on that front.

[David Henshall:]

Yes, I think on a booking basis, I mean right now we still call it getCurrent both the – kind of the reinstatement of subscription I talked about as well as upgrades. So overall it was substantially more than the 12 million that you mentioned. But I think that going forward, yes, we do have better visibility in to the opportunity pool, I think that we’ve got lot more focused effort in terms of going in there, individually attacking and driving specific program into that installed base. And the more we are able to that, I think the more successful we are going to seeing this going forward.

[Dino Diana:]

Okay. Looking at NetScaler and Citrix Online, when you look at, I guess international attractions, I would imagine is going to be one of your biggest pushes for '07. Can you talk about, may be, and do you feel like you have a lot of that. Is that a lot of the reason why we could expect some margin declines from '07 to '06? Would that be a big part of that, obviously offset by those things becoming more profitable.

[David Henshall:]

No, actually I don’t think we are forecasting any margin decline. I mean we are still in our traditional range of mid to upper 20% and --

[Dino Diana:]

I mean from '06 to '07 now.

[David Henshall:]

Yeah, our guidance for '07 is to continue the mid to upper 20% operating margins where we have been, really over the last several years having posted just under 27% for 2006. More directly Dino I think that, absolutely there is a lot of investments that we want to continue to make in both app networking space and in Citrix Online to drive more international revenue. I think these are huge untapped markets right now for us to a large extent, simply because these businesses have been just totally focused on the North American market and that’s where all of the successes come from, not all but a large portion of the success, and it’s just a much broader opportunity for us to leverage the customer base and the GoTo market engine throughout the rest of the world.

[Dino Diana:]

Okay. One last housekeeping. In terms of accrued expenses and accounts payable, as a percentage of total revenue they have been I guess higher than they have been in the last quarter, in this quarter they have been higher than they have been in the past year to few years. Is there anything there and does it have to do with the acquisition. Can you give us some sense of why that is?

[Mark Templeton:]

In Q4 you are always going to see spike and accruals primarily related to commissions and bonuses, and all the things that end up getting paid out in Q1. So I would expect it to go down next quarter.

[Dino Diana:]

Okay thanks guys.

[Operator:]

Our next question comes from the line of Steve Freitas with BMO Capital Markets.

[Steve Freitas:]

Hi, good evening. I just had a question regarding the DDI. Just curious if you plan to use ITA, the transport protocol for that?

[Mark Templeton:]

Of course, Steve, absolutely. It's one of the competitive advantages that we have in terms of performance and functionality. And we are looking at some other possibilities certainly to support RDP with our products, and even I think you may have seen at our October iForum event that we demonstrated how the protocols that are underlying GoToMyPC can be used to make the Dynamic Desktop very portable. So, the good news is we have lots of ways to really provide the kind of connectivity needed to drive desktops to the data center but yet give users the kind of access that they need from either desktop or when they are away from it.

[Steve Freitas:]

And just to extend the line of questioning in the GoToMyPC vendors, is there any reason, why you couldn’t provide a Dynamic Desktop as a service using your Citrix online platform some day?

[Mark Templeton:]

There is no technical reason, I think that there are lots of market, sociological all kinds of other reasons but there really is no technical reason. If you think about it when you enroll your PC and to GoToMyPC service, you are creating a desktop delivery service of your own and it’s a service of one. And the highly scalable platform and can handle massive numbers of PCs, so that’s not the issue, its more business and go-to-market and market development related. And we will see how that plays out, I think the next five years, this style of delivering a desktop and having lots of methodology for doing it very, very strategic set of technologies for us to have position of and leadership in.

[Steve Freitas:]

Okay, I ask my rest of line.

[Mark Templeton:]

Okay, thank you.

[Operator:]

Our next question comes from the line of Manny Recarey with Kaufman Brothers

[Manny Recarey:]

Thanks. Two questions, one can you talk a little bit about the competitive environment in the application networking area and as you focus more on the enterprise customers that you’ve run into Cisco in F5 any more? And then the second question is with the stock option enquiry that you are taking on would it be fair to assume that you won't be filing your 10-K, until that gets completed?

[David Henshall:]

We'll take the second question first to get that out of way. It's an ongoing review so we don't have any direct control over exactly when it's going to conclude, but I can tell you that the board and their outside advisors are certainly driving towards the 10-K filing date. We wouldn't file it until such time as the review is complete but obviously are looking to complete the work as thoroughly and as quickly as possible.

[Mark Templeton:]

Yeah Manny this is Mark so as far as the competitive landscape, I would say there are really no significant changes here. We do see that the second tier players are really starting to fall behind and we see them pop up may be in some International markets but when you look at North America especially, they are just not around anymore, Cisco omnipresent very much in the picture, is routing, switching and so forth but no increase that notable in terms of competition from them in the application-centric Web app delivery market. And as we look at deals and competitive situations, [they cost] host customers, train partners, recruit partners all of those activities on a day-to-day basis, it really looks to us like it continues to be a two horse race between us and F5 and that’s a competitive statement but at the same time, we believe the total available market and the ability to grow the primary market here, certainly as at the number of Web apps increases dramatically is greater than kind of trying to steal share from one player or another.

[Manny Recarey:]

Fine, thank you.

[Operator:]

Our next question comes from the line of Rob Owens with Pacific-Crest Securities.

[Rob Owens:]

Yeah. Good afternoon. Can you give us a sense of your expectations for ordnance both in Q1 and for 2007?

[David Henshall:]

Technically, we said so far for ordnance is that we would expect it to contribute between $15 million and $18 million into our revenue for 2007 and be neutral to EPS for that period.

[Rob Owens:]

Most of the Q1 has any drag on earnings and let us the revenue contribution which you expect?

[David Henshall:]

Yeah. It’s pretty -- it's actually pretty consistent through the year. The first couple of quarters may be just breakeven to fractionally below but I think right now the plan is to run it at a neutral basis throughout the entire year. As far as revenue contribution in the first quarter now I think in the range of $3 to $4 million is reasonable at this point of time, probably $2 to $4 million is reasonable at this point of time.

[Rob Owens:]

Okay and then on the gross margin guidance I think you said 92 to 93 on the prior conference call I think you were talking more of two points of compression and given the rapid growth that you are seeing in A&G why is it a little less than you previously said what's changed?

[David Henshall:]

Well we are talking as much as 2 percentage points compression over the full year 2006. For the full year we posted 93.2% gross margin I believe and with our guidance in Q1 of taking that down as much as 100 basis points I think we are beginning to see that but as we ramped the app networking products throughout the year I think that’s the place we will start to see a gradual decline in gross margin down towards another 100 basis points or more into the fourth quarter.

[Rob Owens:]

Okay and then I think one of the major mandates for '07 was to improve operational efficiencies, given the op margin you're now seeing of the line business and the fact the contribution margin should exceed corporate margin I would guess on a run rate basis by the end of '07. Why aren’t we seeing more margin leverage in the model at that point?

[David Henshall:]

I think right now going into 2007, I mean there are so many different factors across investing and in all the multiple businesses and whether that’s in R&D to integrate and enhance capabilities or develop brand new activities or whether it's in go-to-market investing in the ways that are most efficient for each geography, whether it's, direct partner etcetera. Online, I mean the real challenge there is balancing growth and profitability and if anything, I think that, I would like to accelerate the investment in Online to drive even faster growth into the future. So, we will balance that in a prudent way and make sure that we were continuing to produce very solid op margins out of that division. But are certainly bias for long-term market share gains and sustainability.

[Rob Owens:]

Great. Thanks.

[David Henshall:]

Thank you.

[Operator:]

We have time for one further question, it come from the line of Israel Hernandez with Lehman Brothers.

[Israel Hernandez:]

Hi. Good afternoon everyone, and congrats Mark to you and your team. Most of my questions have been asked, so I will be pretty brief here, Mark can you comment just the macro environment in the IT setting environment as we head into 2007 given that we had a couple of large software disappointments. So far in the quarter and a question for Dave can you comment on the profitability of the Online business in the past you talked about the business running in the mid 20s, I believe in terms of the margin perspective is that where we are currently? Thanks.

[David Henshall:]

Sure. Let me take the second part of the question first, and then I will turn it over to Mark. Overall the business, continue to operate in the mid 20s as I think I mentioned that a little bit earlier, if you exclude the adjustment in Q4 for the determination of the building projects that we had going on that dropped it down to below 20% in the quarter. So, on a pro forma basis, it continues to execute really, really well. Mark?

[Mark Templeton:]

Thanks, David. So, I will comment about IT spendings for sure. So, I think actually, as we came through 2006 feeling like the aggregate spending on IT, its 4.5 to 5%, it felt like it was pretty steady through the year. Then in December, I think a lot of people noticed that Gartner came out with a report, revised their forecast for ‘07 down from this 4.5-5% to 2.5% to 3%. And I think we see that in the marketplace, and not surprised that there would be some larger scale vendors maybe missing on their expectations. I think overall there is a huge compression going on in IT, and anecdotally I was at a very large customers in December, and they told me that the spending on IT at the departmental level of the IT budget was actually faster in growing than the spending on IT from a corporate level, where departments were buying some of their own software services, certainly like our GoToMeeting, and GoToWebinar products, and even buying some of their applications on demand, like Salesforce.com, and so forth. So, I think this is the trend we are going to see. I have been pretty consistent on that for quite a while, and as I like to think of this topic, these are the good old days, and we need to figure out how to operate with IT spending growing in aggregate and around this rate. Which is why we feel really good about 25% year-over-year growth on the top-line, 20% on the bottom line approximately and we have been able to do that last few years and I believe we will be able to continue to turn this type of weight faster than arrogant spending growth rates in as our products in our application delivery messages way and way more relevant going forward than it is looking backwards.

[Israel Hernandez:]

Great, thank you.

[Operator:]

There are no further questions at this time.

[Mark Templeton:]

Well, thank you for joining the call today. As we close out I would like to give you an important save to-date reminder. We plan to host our Annual Analyst Day for financial analyst this quarter. It’s on Tuesday March 6 and we will hold it in Santa Clara just across the street from our brand new beautiful Silicon Valley offices. We will be providing further details on the event on our website you will hear a lots more from our Investor Relations team in the coming weeks. We look forward to seeing you there talking a lot more about the '07 plan, product announcements, go-to-market announcements, etcetera, engagement with the executive organization and answering your questions. So thanks again we look forward to seeing you there and I appreciate you joining us today.

[Operator:]

This concludes today’s conference call you may now disconnect.