Citrix Systems, Inc.
Q3 2009 Earnings Call Transcript

Published: 22 Oct 2009

[Operator:]

Good afternoon. My name is [Lomart] and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Citrix Systems third quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer period. (Operator Instructions) I’d now like to introduce Mr. Eduardo Fleites, Senior Director of Investor Relations. Mr. Fleites, you may begin your conference.

[Eduardo Fleites:]

Thank you, Lomart. Good afternoon everyone and thank you for joining us for today’s call. While we’ll be discussing Citrix third quarter 2009 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 Systems Investor Relations website. The slide presentation associated with the webcast will be posted immediately following the call. Before we begin the review of the financial results, I want to state that we have posted product classification and historical revenue trends, related to our product routines to be Investor Relations page of our website. I’d like to remind you that today’s conversation will include forward-looking statements made under the Safe Harbor provisions of the U.S. Securities Laws. These statements are based on current expectations and assumptions that are subject to risks and uncertainties such as the impact of the global economic climate, uncertainty in the IT spending environment, risks associated with our products and competition. Obviously, these risks could cause actual results to differ from those anticipated. Additional information concerning these and other factors its highlighted in today’s press release and in the company filing with SEC. Including the risk factor disclosure contain in our most recent Annual Report on Form 10-K, which is available from the SEC or on the company’s Investor Relations website. Further more we will discuss various non-GAAP financial measures as defined by the SEC’s Regulation G. A reconciliation of difference between GAAP and non-GAAP financial measures discuss on today’s call can be found at the end of today’s press release and on the Investor Relations page of our website. Now, I would like to turn it over to David Henshall, our Chief Financial Officer. David.

[David Henshall:]

Thank you, Eduardo and welcome to everyone joining us this afternoon. Today, we announce our results for the third quarter ’09, delivering total revenue of $401 million and adjusted earnings per share of $0.43. Despite the ongoing challenges in some international markets, we posted solid results in the third quarter. Customers continue to leverage Citrix products and services to deliver substantial cost savings, improved agility and increase performance across our IT infrastructure. I’m pleased with our execution in the field operationally and within our products organization. So, look at the third quarter, revenue from new license sales was $129 million down about 18% from last year in flat from Q2. I will provide little more color on this in a minute. License update revenue increased 7% annually, result of strong renewal for subscription advantage. Technical services increase 20% led by consulting and maintenance agreements and online SaaS revenue was $79 million with growth accelerating to 21% over last year. From a geographic perspective, the Americas region continue to show gradual improvement in the demand environment with revenue up about 5% from last year to $178 million including a record number of $1 million plus deals. Internationally the environment is still pretty uneven EMEA is clearly behind the U.S. and the economic recovery cycle with total revenue decreasing about 15% of the strong quarter year ago. The main area of weakness is still the small project based transactions and we refer to this run rate. However we are encourage by the rebound and big strategic deals and these deals as well, was some of customers engage in multiyear commitments, which contributed to the growth in deferred revenue. Finally revenue in Japan in a Pacific region was down about 5% year-on-year, but up a few points sequentially as the environment show slow but steady improvement. So, overall we expected Q3 to be challenging and we are encouraged by customer commitments, pipeline build and visibility to continue to move in the right direction. In the fourth quarter we’ll maintain focus on delivering results, both operationally and strategically while building momentum across our main product categories of desktop, datacenter in cloud and online SaaS. So, now let me discuss results within these three areas and not that beginning this quarter, we are making minor changes in the way we report the individual product results. So that they better align with our business strategy and also the way customers are actually purchasing the products. So, first our desktop business, which includes both APP virtualization and desktop virtualization, generated $260 million in total revenue. Over the past couple of quarters, we’ve seen an increasing number of customers looking to acquire these technologies together as part of a strategy for managing their desktop infrastructure and with the introduction of XenDesktop 4. They’re now available from Citrix as an integrated solution. However, for the balance of the year, I’ll still callout the standalone product results in order to provide reporting continuity. So starting with the App virtualization business, this area has been the most impacted by the spending environment, with total revenue down 8% year-on-year to $250 million. As I mentioned earlier, the primary area of weakness here, really across all Geos it continues to be with the run rate, tactical project based business. We believe this is largely a result of the worldwide economic conditions and the ultimate impact on headcount growth and discretionary IT projects. However, there is a number of very positive metrics for this business in Q3, including a sequential improvement in license revenue, record number of strategic million dollar plus license transactions, the Platinum edition representing over 40% of the XenApp license mix, strong renewal rates for subscription advantage, in the low 80s and an increased number of multiyear customer agreements. One thing to note on the multiyear agreements is that, in general a higher percentage of revenue is recorded as an increase in deferred, including the licenses being delivered up front and then recognized through the P&L over the life of the contract instead of the time of sale. While it does impact short term revenue for a bit, it’s very positive for the company long term. Turning now to our standalone desktop virtualization, results again exceeded expectations. XenDesktop revenue in Q3 triple from a year ago to over $9 million, while new customer adoption continues to accelerate with the top 10 deals, all exceeding 2,000 seats each, we expect that the deal size will continue to increase with the availability of XenDesktop 4 this quarter. Mark will be discussing this more in detail. So, next I’d like to review our datacenter and cloud business which consists primarily of our application networking and server virtualization solutions. In total revenue from this business was up 16% year-on-year to $60 million. Results are being driven by an increase in the number of NetScaler enterprise customers, which is up about 40%. So these accounts, plus government agencies, drove two/thirds of total revenue in the quarter. Also in Q3, though, we saw a rebound in demand from internet center companies and cloud service providers, which accounted for three of the top five deals in this area and on a standalone product basis, server virtualization contributed $5.5 million of revenue. Late in Q3, we began shipping our first virtual appliance, NetScaler VPX, combining both NetScaler and XenServer technologies to provide customers really with ultimate flexibility while at the same time expanding our addressable market. Also announced were two midrange appliances in the NetScaler MPX family that offer full enterprise functionality at a lower cost and half the power consumption of competing solutions. Finally touching our software’s and services, online revenue was up 21%, led by the collaboration products in the GoToMeeting family. Customers continue to be very focused on improving productivity while really well cutting costs, and by leveraging the GoTo services, they can immediately reduce travel budgets while expanding customer reach. We’ve enhanced the value proposition even further with our new high def audio conferencing services, which grew by over 70% sequentially and complement the collaboration products to create a true communications suite for SMB customers. Next I’d like to review expenses and operations. In Q3 adjusted operating margin was up to over 25%, an increase of 3% sequentially. This is the result of improved revenue performance and a continued focus on execution. For the past year, as we’ve talked about, our initiatives have been centered around driving cost structure changes, really required as a foundation for long term leverage, but also in a broad reallocation of operating expense in order to invest incrementally in areas of the business that we believe are strategically important, like desktop and SaaS, for example. So on the rest of the P&L, adjusted tax rate was 24.5% in Q3 at 2.5 point increase over Q2 and just a function of the geographic mix of revenue. I expect the rate will decline modestly in Q4. Turing to the balance sheet, cash and investments interested to $1.1 billion driven by a record $134 million in cash flow from operations. Primary use of cash in Q3 was again for stock repurchase, where bought back over 2 million shares at an average price of about $35 each. In year-to-date we’ve repurchased 4.5 million shares. As I mentioned earlier, deferred revenue growth was strong, really due to customers initiating multiyear agreements for our App and desktop products and subscriptions. In total, deferred was up $18 million sequentially, including $39 million of that, which was long term deferred. So finally, I’d like to discuss our current outlook and expectations for the fourth quarter ‘09 and for next year, but before I review numbers, let me provide some context, in how we’re managing the operating plan for the balance of the year. Obviously, economic conditions around the world have driven customers to be more conservative with capital and IT spending, and EMEA in particular is clearly still being affected by the recession and until we see signs of sustainable improvement in this market, we’ll continue to maintain a conservative posture on both our spending levels and revenue outlook. So that said, we are encouraged by improving dynamics in certain markets, high level of interest across desktop virtualization, shared gain in App networking and a trend we’re seeing for customers wanting to engage in larger and more strategic level of transactions. So for the fourth quarter of 2009, we currently expect total revenue to be up 3% or 4% as compared to the fourth quarter of 2008. Adjusted operating margin to increase 50 to 100 basis points from Q4 ‘08 and interest income of approximately $5 million; for the full year 2009, our guidance is unchanged. We still expect that revenue will be up modestly from fiscal year 2008, and adjusted operating margin to be increased by up to 100 basis points as compared to last year. With respect to 2010, our preliminary guidance is for total revenue to increase 8% to 9% annually and a continued commitment to operating leverage that will drive a 75 to 100 basis point expansion adjusted operating margins. One important item that I want to point out that will influence results for 2010 will be the pace of desktop virtualization adoption within our installed base. Based on all of the program options, we expect that both new sales of XenDesktop 4 and the XenApp trade up program will generate on average, a slightly higher mix of deferred revenue than we see today. So we’ll be updating these expectations on our fourth quarter earnings call after we have three more months of visibility into our customers 2010 budgets and the rate of the XenApp trade up program. Ultimately, our confidence in our market position and our ability to drive long term growth while improving margins remains unchanged. So now I’d like to turn it over to Mark to give you additional details on the quarter’s performance and discuss our ongoing businesses. Mark.

[Mark Templeton:]

Thanks, David. As you can tell, we feel really good about how we’ve executed in a very tough environment and really position Citrix for the future. As David said, we’re staying very disciplined in our fiscal approach and operational management; but at the same time, we’re moving aggressively in some of the industry’s most exciting markets. I spent a lot of time in the field over the past three months. My read is that customers are prioritizing virtualization up, based on ROI, on business impact and IT agility. This has rapidly raised our profile with customers, because Citrix brings the power of virtualization to applications, to desktops, to meetings, to networks, and to servers, with innovative compelling products that also operate as an end-to-end infrastructure. We’ve done a lot to solidify our market position, to broaden our impact with virtualization at the desktop to expand our footprint in web based collaboration, and to strengthen our ability to tap the build out of next generation data centers and clouds. I’d like to provide some market and strategic perspective in these areas, beginning with the desktop virtualization space. Clearly at the desktop there’s a lot going on. Ageing PCs, a pending migration to Windows 7, an explosion to consumer devices and increased need for mobility. All of this is shining a spotlight on the need for virtualization at the desktop, an area where we’ve been driving a lot of innovation and revenue for quite sometime with XenApp and XenDesktop. We see three significant opportunities in this area. First is App virtualization, for separating Apps from the underlying operating system. Second, basic VDI for hosting desktop VMs in the datacenter; third, full desktop virtualization, that goes way beyond VDI to support all of the major virtual desktop models in a single integrated solution. Best in class products in each of these areas give us the largest market reach, customer choice and an optimal solutions for each scenario. XenApp continues as the market leader when it comes to virtualizing Windows Apps. There were some very large deals in Q3, as David mentioned, with several customers expanding XenApp enterprise wide based on the extraordinary App TCO, security and availability it’s well known for. By virtualizing Apps at the desktop, installation becomes a thing of the past, simplifying desktop patching, App updating and tech support, making more people more mobile and productive, and saving IT a lot of time and money. In Q3, we introduced Feature Pack2 with over 50 enhancements, including new technologies that offer 100% App compatibility, huge performance improvements in flash media, broad supports for USB devices, and policy based power and capacity management, to name just a few. This quarter, we’ll deliver a new releases of Citrix Dazzle and Receiver, bringing for the first time self service to enterprise Apps. I can tell you from personal experience, it’s really amazing to start up a brand new Windows7 PC, setup Citrix Receiver in just a couple of clicks, and open Citrix Dazzle to select application. Basically, zero to productivity in less than 15 minutes. No installation, no IT intervention, and you get any App for productivity, line of business, multimedia, even voice and video. Self service Apps on demand is the future and that’s delivered now by Citrix XenApp. The potential is enormous, especially for enabling Windows7 migrations, for next year’s Office 2010 upgrade, for BYOC programs, and for Pandemic initiatives, all market timely and very powerful. The next opportunity is the have VDI space. Over the past two years, VDI has generated a lot of interest as a new way to deliver desktops. Historically, the user experience and the cost of a hosted VM have been show stoppers for many customers. 15 months ago, when we launched the XenDesktop, all that began to change and the momentum has continued to exceed our expectations. In Q3, product bookings were up over 20% sequentially. Initial pilots and deployments were up 25% sequentially. We added over 400 new customers across every vertical, and pipeline growth was up sharply, up over $50 million sequentially. We’re executing well in this area with the channel including the strategic SI relationship we built with partners like CSC. Our VDI go to market collaboration with Microsoft also resulted in some very solid joint wins for both XenDesktop and Hyper-V, and we now have agreements in place that enable HP, Dell, Fujitsu, and IBM to offer XenDesktop on their own hardware and services platforms. Two weeks ago, we raised the bar in VDI with the introduction of a new XenDesktop VDI edition. This new product includes our industry leading HDX technology, where users get a high definition experience, even when using multimedia, real-time collaboration, USB devices and 3D graphics, all while using 90% less bandwidth than competing solutions. The VDI edition also features user profile management, provisioning services and our storage link technology for seamless integration with existing storage systems; and the virtual infrastructure you need is right in the box, including both XenServer and Microsoft’s Hyper-V. In addition, it also runs on ESX and vSphere making it the most open, most powerful and most flexible VDI solution on the market. The XenDesktop VDI edition competes head to head against the premier versions of competitive products at a better price, and offers the industry’s most flexible licensing available per user, per device, or concurrent. Many customers, however, have learned that VDI alone will never address all users. What they really need is a far more flexible system that can deliver virtual desktops and Apps to all users online or offline, independent of device or location, that’s exactly what we’re offering with the new XenDesktop 4 Enterprise and Platinum Editions. Customer interest has been amazing. At this week’s Gartner Symposium, they turned away over 150 people at a session featuring a Citrix XenDesktop Case Study. In fact, Gartner analyst, Mark Margevicius said, 80% of his client calls are now about desktop virtualization. We believe the excitement here is being driven by the enthusiasm around Windows 7, the growing use of MACs in the enterprise, the explosion of netbooks and smartphones, and the growing need to support a more virtual work style. The new XenDesktop is not an incremental improvement. It’s an order of magnitude leap forward, making virtualization at the desktop, a reality for everyone. XenDesktop 4 combines the features of our VDI edition with our new FlexCast delivery technology. With FlexCast, XenDesktop is the only product to support every major desktop virtualization model in a single integrated solution. Hosted share desktops, VM hosted desktops, hosted blades, locally streamed, and in the future, local VM desktops. This gives XenDesktop customers the flexibility they need to deliver the desktop as a service to any user, on any device over any network connection. XenDesktop 4 also includes on demand Apps by XenApp, giving customers a single desktop virtualization system, where Apps and desktops are centrally managed with the flexibility to virtualized in the datacenter, on the client or in a hybrid of both. This allows customers to simplify desktop computing for the broadest range of users, including task workers, power users, guest workers, contractors, and mobile employees. XenDesktop Enterprise and Platinum Editions feature flexible licensing by user or by device, and they’re priced for enterprise wide deployment. We’ll also be offering a campus wide licensing program for K-12 and university customers. For our 200,000 XenApp customers, we’ve also introduced a two for one trade up program. This gives them an easy, affordable path to XenDesktop that leverages their existing XenApp licensing, infrastructure and knowledge base. The early response has been fantastic. From a business perspective, this allows our sales teams to engage in project based solutions that touch a subset of users, as well as strategic solutions with the potential to touch every user in the enterprise, elevating and further strengthening our relationships with top level IP executives. The new XenDesktop establishes Citrix, as both though and innovation leader, expands the addressable market for virtual desktops, fully exploits our technical aspects for virtualization at the desktop and delivers a solution to the widest variety of users at a competitive price. We have a high velocity, innovative roadmap ahead that includes our XenClient technology. XenClient is a bare metal hypervisor; we’re developing in collaboration with Intel. This technology makes virtual desktops a reality for disconnected mobile workers, allowing both personal and business desktops to run securely and independently on the same device. This project is moving ahead rapidly and will become yet another game changing component for virtualization at the desktop. Virtual laps, virtual desktops, virtual clients. We’re setting the stage for the broadest range of solutions for customers. In fact, in a recent article, Gartner said, “By the end of 2012, we expect that 60% of all enterprise desktop configurations will use virtualization technologies of one sort or another to deliver all or part of the windows desktop to users.” We agree, going virtual at the desktop makes people more mobile and more productive, and going virtual gives IT control of the cost, performance and availability of desktop services. Going virtual ends the tug of war for control, because it gives users and IT control of precisely what they want. Citrix is also a market leader in another area of virtualization at the desktop, virtual meetings and web based desktop support. These SaaS delivered products help customers reduce travel, increase tele working and enable cost effective remote access and support. In Q3 our online services revenue continued to accelerate. GoToMeeting and GoToWebinar grew an impressive 41%, registering another up tick in market share. GoToAssist, for remote desktop support, had another strong quarter with continued uptake of our express edition in prosumer and professional markets. Our new audio service, high def conferencing, continued to gain momentum with strong sequential growth as more SMB customers responded to the high def experience and the predictable pricing of our flat rate plans. Cross selling between audio and web conferencing was strong during Q3 and our new integrated toll free service for North America will create additional opportunity to sell 800 number services to both our GoToMeeting and GoToWebinar customers. Web and audio collaboration are significant global market opportunities. That’s why we continue to invest aggressively in these areas. Web collaboration, in our opinion is a triple play business. That includes meetings, webinars and training. GoToTraining, now in beta, completes the triple play with another simple, easy to use SaaS product. When available early next year, GoToTraining will allow us to enter the fast growing virtual training market, as well as fulfill the virtual training, webinar and meeting needs of the larger enterprise. So we’re pleased with the accelerating growth of our online services business and optimistic about the market opportunity ahead. Next I’d like to discuss our datacenter and cloud business, where NetScaler and XenServer are bringing efficiency, flexibility and cloud enablement to the enterprise center. Our App networking products led by NetScaler had another strong showing in Q3. For the second quarter in a row, five NetScaler customers representing both enterprise and cloud computing segments purchased over $1 million of product. Our growth in this space is being driven by innovation on multiple fronts. First, we started the quarter on a high note, announcing two new mid range NetScaler MPX appliances that target a price performance sweet spot no other competitor is addressing. This gives us the broadest product line in the industry, scaling from small, single App virtual appliances to high end systems that power the world’s largest websites. In late September, we began shipping the highly anticipated NetScaler VPX a ground-breaking new virtual appliance that delivers all of the functionality of NetScaler in a low cost, easy-to-consume virtual machine. More than 4,000 customers have already downloaded VPX. This is a remarkable number, especially in a market that shifts about 40,000 physical appliances each year. Q3 saw a new magic quadrant from Gartner that moved NetScaler further up and to the right in the leader quadrant. Now, for the third year in a row, this continues to be a two-horse race, and Citrix is gaining share. As the cloud market emerges and enterprise datacenters become more cloud like, our NetScaler business is bringing unparalleled innovation and price performance that is truly changing the game. The other key component of our next generation datacenter in cloud strategy is enabled by Citrix XenServer. As we enter Q4 our strategy of offering XenServer as a free download continues to exceed almost optimistic expectations. An amazing 20% of global Fortune 500 companies have now activated XenServer for production use. That’s more than double the number from last quarter. These customers are discovering why Burton Group recently certified XenServer as the only virtualization platform, other than VMware, to meet 100% of the required features for enterprise deployment. According to industry analysts, more than 70% of virtualization customers now use multiple hypervisors in production. So, I’m more confident than ever in our Citrix essential strategy to monetize both XenServer and Hyper-V, the two fastest growth virtualization platforms on the market. Q3 also saw the announcement of the XenCloud open source project, a new community-led initiative to build on the leadership of Xen in today’s cloud and starting this quarter, the project will begin to deliver a secure, flexible virtualization platform that’s perfect for the federated cloud services of tomorrow. By taking a more open approach, the XenCloud initiative stands in start contrast to the proprietary cloud platforms being developed by other vendors. Customers using the XenCloud platform will enjoy easy interoperability between internal private clouds and external public clouds, across any of the leading hypervisors, all without locking them into any particular vendor. We’re extremely excited about what’s coming in this area and proud to be working with key partners, like HP, Intel and Oracle to deliver a more open approach to Cloud computing. You will see a lot more from us in this area going forward, so stay tuned. In summary, we are leveraging the diversity of business models and virtualization products, from meetings to support, from Apps to desktops, from networks to datacenters and Clouds. Clearly we’re aligned with some powerful market and technical transitions providing our customers with next generation solutions that help people and businesses do extraordinary things. Now, I’d like to open it up for questions.

[Operator:]

(Operator Instructions) Your first question comes from Phil Winslow - Credit Suisse.

[Phil Winslow:]

Just two quick questions, first David, maybe I missed on the call, but I wanted to get the number for what a XenApp license has increased or decreased year-over-year? Then, Mark, just a question about XenDesktop in the pricing structure, you’re including a full version of XenApp and there I just want to get a sense, as you think about this market, how much of this is sort of a story of just increasing penetration, and versus potential cannibalization of XenApp as XenDesktop starts to growing kind of how you balance those two?

[David Henshall:]

Phil, let me take the first part. I didn’t give that number out on the call it’s just simply because it’s becoming less and less relevant as customers are looking to engage in both desktop and App. For continuity, for your modeling purpose, just too much it was down year-over-year in the mid-to-high 20s.

[Mark Templeton:]

Yes, the Enterprise and Platinum editions of XenDesktop4, licensed on a user or device basis, do include full XenApp rights for that user and/or device that is assigned the license. This is, first of all, it’s different from XenApp, which is licensed on a concurrent basis. So that gives customers, just for the XenApp piece of it a choice among all of those licensing models. Secondly, the strategy here is pretty simple, and that is overall, for virtualization at the desktop, we’re trying to drive the overall primary market to grow into the potential that companies like Garner talked about. I think, recently they had a report that said, they expect about 50 million units, over $65 billion in total revenue by 2013, and that’s going to take products that are innovative, that are designed for broad licensing and usage in the enterprise and by adding XenApp to XenDesktop, we’re enabling that. The second piece of the strategy is, to make sure that we participate in this market as much as possible and Garner the largest share, and we’ll do that by really leveraging our install base, which is what the trade up program is designed to do, giving our customers that want to move forward to full desktop virtualization a real easy path to do that, as well as a program and trade up that allows us to address, to recapture the XenApp base that is on expired SA. Both of those things will allow us to then enjoy the largest share of the marketplace, as we also obviously drive on the new customer front as well. So the message here is, much larger pie overall, with Citrix taking the biggest share as possible, and all of that going from the 15% to 20% sort of penetration of desktops in the enterprise historically to numbers that are much, much higher than that, because the potential for desktop virtualization overall is much, much greater than where we’ve been in the past.

[Phil Winslow:]

Just one quick one housekeeping item, David, we saw a drop in R&D, pretty significant quarter-to-quarter this quarter. Is there anything one-time in there, or is that the new run rate we should think about?

[David Henshall:]

Yes, Phil, there’s always some project based stuff. If you remember, there was a pretty big pop between Q1 and Q2 in the R&D line that went up. So yes, there’s usually some level of things that are either capitalized or project based etc., but I think, on a go forward basis, you should expect R&D to be up modestly on a sequential basis.

[Operator:]

Your next question comes from Sarah Friar - Goldman Sachs.

[Sarah Friar:]

David and Mark, just with the guidance for next year, I know you’re early to give us a first read. Within that 8% to 9% revenue growth, can you talk a little bit about your assumptions on the spending environment and in particular what XenDesktop or what VDI traction you’re kind of assuming within that?

[Mark Templeton:]

Sarah, this is Mark. I think, at this point the spending environment that we’re thinking about is basically modestly better than 2009. Really on the trajectory, that we’ve been on all year and no significant inflection point in the overall spending environment. I think anyone can call that, at this point at all. Then I think, what you see in our numbers is continued confidence in our ability to execute, especially in the desktop side, which I think that in spite of the kind of spending environment, there’s an overweighting of spending on the desktop, reducing the costs, migrating to Windows 7, putting the new Office 2010 out there, all of those kinds of initiatives. I think those are going to move pretty quickly Then we also have great confidence in our ability to execute in our SaaS business and then of course, we’re doing great work in the Web App delivery segment. We believe it will continue to gain share there and then obviously, monetizing in the datacenter on the virtualization platform and in the cloud, it’s a slower process. We’re just trying to make sure we lay down Xen in both forms on the cloud side and the datacenter side to create sockets for us to plug all of our other products into over the course of the next couple of years.

[Sarah Friar:]

Then just, I mean I guess the bottom line element of the guidance as well, just wondering what that assumes in terms of increasing the headcount and any more investment you need to do in channel or partners, particularly for the VDI opportunity?

[David Henshall:]

I think that includes a modest increase in headcount, and you really hit on the areas that we’d be focused on. Its go-to-market and some of the more strategic R&D areas, every place you’d expect. Certainly, not any real increase in the infrastructure components of the business. I think we’ve been focused on those for a couple of years right now, building out of scalable foundation that we can leverage at this point forward. So at this point it’s just our high level expectation for the way we’re starting to shape 2010 business plan. We’ll refine this obviously a lot more as we get into the Q4 earnings call in three months.

[Sarah Friar:]

Can I form very quick final one? You have a lot of cash on the balance sheet $1.2 billion, any kind of thoughts around M&A or increasing the stock repurchase at this point in time?

[Mark Templeton:]

Yes. It’s a good problem to have. I mean we had really strong cash flow this past quarter. I think it’s the highest cash balance we’ve ever had. While we stepped up the share repurchase actually in the third quarter, spending about $75 million on stock buyback. So at this point, probably expect share repurchase to continue to be our largest use of cash in Q4. We have a couple of hundred million dollars remaining in the existing authorization; and really nothing material to communicate on any other front at this point.

[Operator:]

Your next question comes from Israel Hernandez - Barclays Capital.

[Israel Hernandez:]

On XenDesktop, as we move from proof of concept to some of these larger scale deployments that we’re starting to hear about, you’re starting to close. Dave, how should we think about the revenue build for the XenDesktop? Is it something that’s likely to compound more on the balance sheet in deferred revenue, given that some of these deals are likely to be longer term in nature? How would you reconcile the deferred versus new license contribution for XenDesktop going forward?

[David Henshall:]

It’s actually a great point, Israeli. I called out a couple of times in my prepared remarks about deferred and some of the dynamics we’re seeing right now with customers looking to engage in either multiyear agreements or in many cases just agreements that include multiple products, as well as multiple years of subscription, etc. So on balance, I’d say that you should expect a modest increase in the deferral percentage across both new XenDesktop 4 sales, as well as the trade up program for XenDesktop. So if anything, you may have a little bit more going to deferred, it will bleed back in over the life of the contract. We will have some of these multiyear contracts, but I think usually the average will be more toward a year, a year and a half. So, consider the impact modest at this point, but certainly trending in that direction.

[Mark Templeton:]

The only thing I would add is that within XenDesktop 4 we’ve also introduced an annual licensing option that allows customers to basically come in at a lower entry point from a cash point of view and just go on an annual kind of subscription license. So, obviously that’s an entirely ratable and I think that my guidance would be that the larger that the deals are the more that they drive deferred and a big design point of XenDesktop 4, certainly in the enterprise and Platinum editions, is to drive those enterprise wide programs. If you look at those two SKUs and you match them again our different levels, including our level seven program, which is basically an ELA type program, we expected to see more and more of that happen as the word gets out and customers really consider our sort of style of full desktop virtualization as sort their new way to manage desktops in general.

[Operator:]

Your next question comes from Michael Turits - Raymond James.

[Michael Turits:]

Talk a little bit about how you expect Windows 7 to drive XenApp or XenDesktop growth in the near term?

[Mark Templeton:]

So, first on Windows 7, I tried to mention in my prepared comments, for XenApp it’s just a great opportunity, because what you can simply do in a Windows 7 migration is focus the migration on the desktop itself, which is about, perhaps you refresh laptops, desktops, etc with a new Windows 7 device, but then in the migration process, you actually migrate Apps in a self service model without actually installing them on the local desktop. So that allows, even though some of them maybe selected and run locally, they’re managed centrally and they’re isolated from the Windows 7 operating system. So, this way, you can put out a standard, ubiquitous, pristine type Windows 7 device and easily let your users self serve the applications that they need to do their work. So that’s the first opportunity and obviously, it gives us a great time to talk with customers about how you actually deliver applications into a physical Windows 7 kind of a refreshed machine. The second area obviously is where some customers are really thinking a little bit more holistically and are thinking about virtualizing desktops, either all or in part across the enterprise and in that case the occasion of a Windows 7 migration is a good inflection point, transition point to have that very strategic conversation and we’re having many of those. In conjunction with Microsoft, by the way and many large accounts around the world, because the prospect here is to be able to again give much more flexibility to users, lower costs, better control of security for IT, and do that in context of the Windows 7 migration process. So, one is very tangible and one is more strategic and directional and architectural, but both are great opportunities that will play out over the next 18 months or so.

[Michael Turits:]

Citrix Online grew pretty well during the quarter year-over-year. Is that a good growth rate to use for the fourth quarter in 2010?

[David Henshall:]

The online team has been executing really well. One of the things that’s driving that is the addition of the incremental high def conferencing services. So I think for a planning rate in the high teens is probably good for Q4.

[Operator:]

Your next question comes from Todd Raker - Deutsche Bank.

[Todd Raker:]

So I’m just trying to get a little bit better sense in terms of the desktop virtualization market. From a competitive perspective, why is it that you guys wouldn’t lose in this market currently or further out and what is it besides your desktop experience that you think is really the competitive differentiator today when you go in and pitch business to a large enterprise?

[Mark Templeton:]

We have no plans on losing, so I’m not exactly sure how to address that particular question, but let me just flip it around. Really it’s the second part of your question, around how we’re approaching it and what differentiates. So first of all, the core approach that we’re taking is that the desktop market really hinges on the ability to service users and user experience. We’ve learned that from having over 100 million users using Citrix XenApp on a daily basis. So we’ve been doing virtualization of the desktop for a long time. So that’s the first big brick in the strategy. It’s a hinge point, because if you don’t have the user experience right, nothing else matters, because you end up with a revolt in the user population and that’s the last thing that IT organizations want or need. So that’s key. So HDX and all of the enhancements we’ve made really starting with the ICA protocol, which is in foundation of HDX, but all the things we’ve done around everything from USB support, multimedia, real-time for Isoquanous kind of devices, video conferencing as well as edge cashing with our IntelliCash technology, so all of that becomes a real differentiator for making virtualization at the desktop actually work for the users that are being served. So I just can’t under emphasize the importance of the user experience as a differentiator.

[Todd Raker:]

So if we look at the $9 million in revenue you guys did this quarter, what do you think that implies in terms of market share on the desktop? I know it’s incredibly early, but just trying to get a sense for where you think that puts you?

[Mark Templeton:]

Yes, I think that market share in this market is tough from a definitional point of view because, there are a lot of piece parts to it. I’d say that, we’re contending for market leadership. I think that’s how we feel about our position, as we look at what we estimate on an internal basis in terms of units and so forth and so on, and what we see customers actually doing. That’s how I can answer you right now. I think we have to let it play out, but then the other key piece in this market, to drive the primary market is to make sure that all of this can scale and touch the maximum number of desktops and users in the enterprise and that’s why this focus on FlexCast and being able to drive the desktop from a horsepower point of view down to the end point and leverage the CPU there, or to host it in the datacenter; and the same thing goes for the applications themselves. It’s such an important piece of making this kind of technology actually work on a very, very broad basis. Thinking about VDI only, you’ll always come to the conclusion the market will never make into a big one and go to mainstream, but when you look at it the way we do around user experience, FlexCast and, kind of this device and network independence, that’s where you see this market getting really big. So executions ahead, that’s how we continue to win, and staying aggressive.

[Operator:]

Your next question comes from Bhavan Suri - William Blair & Co.

[Bhavan Suri:]

Just a question on this 2-for-1 trade-up, are you seeing any customer push-back? Because if I do the math and say I had a $95 upgrade to XenDesktop from an existing XenApp customer and I now say I’m going to take the concurrency from 3 to 1 to, say, 2, so I’ve got to pay twice that license. The price, it feels to me like it’s going up for the customer. Am I thinking about that the right way, and are you seeing any push-back, or have I got that wrong?

[David Henshall:]

It’s probably too early to tell. I mean, the products really aren’t released and available for shipment until the middle of November. So we don’t have a whole lot of great firsthand experience at this point, but I will say, if you look across our installed base, as you know, there’s millions of licenses out there with countless use cases, and the concurrency being employed by different enterprises covers everything from 1 to 1 all the way up to probably 10 to 1 or greater. Our research indicates that it’s about a 3 to 1 concurrency on average, and so for some customers, it may be, it could potentially be more expensive for others, it could be, a very beneficial trade for them. I think overall, you have to come full circle and think about why we’re doing this and a lot of the switch is about the primary market, driving share, expanding the opportunity across desktop virtualization. It’s about increasing penetration with in our existing accounts and then as part of the trade up offerings, it’s also about reengaging or recapturing those millions and millions of licenses that have collapsed on subscription or have never purchased them in the past. So it’s really about attacking the installed base as well as the broader opportunity, so we feel very good about that.

[Mark Templeton:]

Maybe the thing that I would add and the way to think about this to the premature you have implemented XenApp on a small basis. It’s more likely that you’re going to have implemented it on a higher concurrency ratio. For that kind of customer we haven’t change anything. XenApp goes on, we’re investing heavily in it, and they can continue to enjoy that kind of environment. As soon as you start to move, I’m going to move from a pocket kind of use of this technology to much broader type use then I think naturally your concurrency ratio, even if you stayed with XenApp entirely would actually change from a higher concurrency to a lower concurrency. So customers that are already over that sort of threshold that are in the lower currency range at this point, really see this as either a gain or a wash with the ability to move forward to a full desktop virtualization system. As we have tested and talked with lots of customers, especially since the announcement, the more strategic the customer, the more excited they are. The customers in the middle are actually quite happy about maintaining XenApp and seeing us introduce the VDI edition, because they want to wade into this space a little more slowly. So, I think we have kind of got this sort of optimal mix of solutions for customers depending upon which way they want to go, project or strategic, small or large, low concurrency, high concurrency. That’s the way we’ve approached it.

[Bhavan Suri:]

Just turning to the GoToMarket mix, traditionally, it’s been heavy channels and less so direct. My sense is that it’s becoming more of a direct business, especially as you get larger deals, as you become more strategic. How should we think about that going forward and is that pattern going to continue?

[Mark Templeton:]

I think of it a couple of ways. We’ll continue on the trajectory of having the capacity and capability, but mainly the capacity to touch more customers on a direct basis in terms of a conversation and engagement. At the same time leveraging a bigger platform of partners, not only our classic integration partners that have been so important to our growth, but also the newer type partners like a CSC or other SI partners, both tier 1 and tier 2. The key thing to remember there is these systems don’t go into place without an integration project. You can do pilots, you can do small things without a big integration project, but you can’t do anything significant or serious without a good design, architecture or integration provider and that’s the role they play. So we’re really up leveling a lot of the relationships that we’ve had, not only with CSC, but across the other SI partners we’ve worked with for quite a long time, whether it’s Accenture, the HP EDS team, and others around the world that are playing at the tier 1 or tier 2 levels.

[Bhavan Suri:]

In the increase in deferred revenue, the sequential increase in deferred between Q2, Q3, just trying to understand how much of that was driven by the longer term XenDesktop deals versus, say XenApp deals?

[Mark Templeton:]

It probably doesn’t make sense to break it out. It’s a combination of all the above, I mean you’re seeing more customers wanting to engage on both App and desktop virtualization as well as, frankly, creating a proxy for what is now XenDesktop 4.

[Operator:]

Your next question comes from Steve Ashley - Robert W. Baird.

[Steve Ashley:]

Actually like to just circle back to this topic of deferred revenue. It’s just not clear in my head yet sorry about that. When a XenApp or XenDesktop deal ends up being recognized as deferred revenue versus when it doesn’t?

[David Henshall:]

There are a number of different scenarios that would drive that. One would be that a customer is buying, let’s just say, a thousand new seats and they also want to buy three or four years of subscription on top of that. So the way that the entire deal would and the way the residual accounting works is that basically any end user discount gets applied against the license piece, and therefore less is coming up front and you recognize the balance ratably over the contract. Another thing we’re seeing is customers wanting to engage in more term based. As Mark just mentioned, not just annual, but in some cases customers looking for two or three year agreements where they want to just essentially roll up all of their requirements for App and/or desktop and just say hey, it’s three years, and we’ll pay you this much, and we’ll recognize it over that period of time and then there are probably a few others but those are the two we’ll see most regularly.

[Steve Ashley:]

As I look at your VDI solution, you have put together a number of separate pieces of technology that give you this ability to deliver that end-to-end, especially over WAN, is there anything we can look for in the future in terms of integration that might make that easier to deploy for resellers and for customers in the future?

[Mark Templeton:]

Before I answer that, let me just add something to your prior question. That the trade up program does have significant deferral rates. So that’s another key piece that we’re going to see play out over the next, say six quarters in some significant way and there are two versions of trade up there’s a 2 for 1, and 1 to 1 and the 2 for 1, the deferral rate is almost a 100% and the 1 to 1, the deferral rate will range, but figure 30% to 60% and that’s for customers that are current with their subscription. If they’ve got a lapsed subscription, then the deferral rates are lower and we get to recognize more, and those deferral rates are in the 30% to 40%. That’s why Dave was saying there are multiple moving parts here in terms of what drives deferred. I think overall, to the degree we’re trying to leverage the installed based and touch every desktop in the enterprise, to the degree that we’re successful in doing that, the more successfully we are the more we’ll drive the deferred account on the balance sheet. That’s the way that I think of that. On VDI and desktop virtualization, I should say in general, a key piece of the agenda for 2010 is to bring more and more simplification in the infrastructure to make these systems much, much simpler to bring up, online and live and that ranges from things we’re doing on the back end to things we’re doing in the HDX end, which is the part that really runs over the delivery network. Part of what we’re doing is making everything VMs, so all of the HDX technologies that really rely on brand for Peter and Access Gateway and some of the other things we put on the network become virtual machines, which are much easier to put online and configure and similar simplification on the backend as we remove some unnecessary pieces, etc, that result in bringing some of the components together from acquisitions over the past couple of years. So that’s the big agenda item for 2010.

[Operator:]

Your next question comes from Tim Klasell - Thomas Weisel Partners.

[Tim Klasell:]

The question is the VDI market, a more narrow market versus the broader desktop virtualization market. How big do you think the VDI market is of the overall desktop virtualization market? Is it 10%, 20%, 50%? Can you give us a view of what you’re seeing in your pipeline?

[Mark Templeton:]

It will be a total swag, but it’s probably 20% to 30%. The way I thought of dead reckon to that is that, if you look at the pipeline in terms of the SKUs that are in the pipeline, and even what we’ve seen in the last four quarters in terms of product mix, the revenue is skewed up into the Enterprise and Platinum editions, which are not the VDI. They incorporate VDI, but they’re way beyond VDI. So, really it’s the minority of the volume that’s been down in this basic VDI space, which is fine, and it’s a great solution for certain types of situations, but it’s not a panacea, and we’re trying to create the panacea with the Enterprise and Platinum editions, when it comes to virtualization of the desktop.

[Tim Klasell:]

How big are your largest desktop virtualization deployments to-date, maybe you have a competitor out there saying their top five have 20,000 seats or more. What are you seeing with your top five deployments to-date?

[Mark Templeton:]

The largest one that is public, right that you can observe and look at, is approaching 20,000. It’s a former account of a competitor of ours, and it’s approaching 20,000. The last time we had a report, by the way, on that is that a third of the 20,000 we’re running in this sort of VM hosted VDI style, and the balance, two-thirds, were running in a stream to the diskless end point model. That customer is also using XenApp in a huge way, as well. Then, there are quite a few that are approaching 5,000 and 10,000 in service, but your question is about in production versus what’s been sold, and I would question whether those are in production in terms of what you’re hearing from others in the industry, in the field.

[Tim Klasell:]

Then a quick question on the server virtualization with Windows Server 2008 R2 coming out tomorrow, how do you think that’s going to affect XenServer sales, and how should we think about that going forward?

[Mark Templeton:]

I think, the hypervisor is free, even with R2, and it becomes more capable, and we like seeing that, because both XenServer and Hyper-V are platforms that we build on. The monetization that we have on server virtualization is based upon Citrix essentials. So to the degree that R2 actually makes Microsoft a stronger player in server virtualization, it actually gives us a better platform to sell Citrix Essentials for Hyper-V. So we’re actually looking forward to the release and working closely with Microsoft to add the value to make the combination of R2 plus Essentials for Hyper-V to be an enterprise worthy and ready platform for the data center.

[Tim Klasell:]

Then one final housekeeping, the federal government, how did that vertical do on the quarter?

[Mark Templeton:]

I think it did great. They had another good quarter. The only thing I’d point out, and just to tie just I it tied back to last quarter, if you remember we had a couple of very, very large WAN scaler or WAN optimization transactions in federal space in Q2, and we had said that there wouldn’t be, those really wouldn’t be in the Q3 number, and they weren’t. They still had a fantastic quarter on top of that, and probably one of our top three verticals in Q3.

[Operator:]

Your next question comes from Robert Breza - RBC Capital Markets.

[Robert Breza:]

David, just as you think about more of the bundling and some of the trade up deals that you’re talking about, more deferrals. Would you expect obviously deferred revenue growth then to kind of outpace revenue growth as we go forward next year? Any color around that would be helpful.

[David Henshall:]

It could, but only on certain product segments. Right now, we’re just trying to raise the level of visibility to the large deals and some of the dynamics going on in the market. Just to give you an order of magnitude, you look at total product license revenue, about $130 million last quarter, and then the growth in deferred of $18 million and I’d say $13 million of that was related to big multiyear type deals and that probably should be kind of the perspective you should think about it. We’re not going to see a massive shift to defer. I think this is just more of a gradual trend that you’re going to see. We’ll call it out and just make sure that we have appropriate visibility to it.

[Operator:]

Your next question comes from Abhey Lamba - ISI Group.

[Abhey Lamba:]

Mark, given David’s comment about constraints on capital budgets, do you think that delays in desktop virtualization implementation until budgets start to close significantly?

[Mark Templeton:]

We’re actually looking at the way we’re approaching this. It’s really not being largely dependent on capital budgets. If you think about it, if you’re thinking VDI only, what you have to imagine is a huge datacenter build out. When you’re thinking about XenDesktop, Enterprise and Platform, you think about being able to drive Apps and desktops down to the end point, leveraging the power of a laptop or a desktop machine, either with a disk or diskless. So I think that we get a little bit of a relief on that, on the capital budget side. So if you look at the last four quarters, in terms of the trajectory on XenDesktop, I think it’s been pretty darn good, even in times when capital budgets were pretty much shutdown. So that’s the way we’re thinking about it right now. Obviously, every quarter we get more data, and certainly with the announcement of XenDesktop 4 creating a lot of enthusiasm, we’re going to know a lot more after this quarter.

[Abhey Lamba:]

Secondly, what do we need to see happen for the run rate business to comeback? How important is the employment growth to drive your run rate business?

[Mark Templeton:]

Hard to know, I think that part of what will bring the run rate back, honestly for our partners to be able to go into customers that have been doing smaller projects, bring them the newest technology and stimulate those small projects with XenDesktop 4, which can actually be done potentially depending on the project at a lower price point and that will drive some business down there. The other thing that can drive some business down there’s this reengagement with customers that have lapsed SA, because the more strategic they’ve viewed XenApp, the less likely that their SA has lapsed, and the less strategic, the more likely it would be lapsed and those tend to be smaller, project oriented types of customers. So again, we try to incentivize and help our partners to go in. They generate services revenue and it creates a recapture of a license and a customer for us. So I think that’s probably the way to think of that and then otherwise, we just need a better overall economic environment, I’m not sure anybody is predicting anything going great next year. In fact, I think most predictions are for yet another jobless recovery and so we could be looking at a couple of years of employment issues, and so we don’t want to tie ourselves to that.

[Operator:]

Your next question comes from John Difucci - JP Morgan Chase.

[John Difucci:]

I want to go back to I think it was Sarah’s question from the start, guys and looking out into 2010. In this quarter you actually saw a dip in license growth from last quarter, so it sort of tells us that momentum slowed a little. I realize there’s a lot of other things’ happening there, but there’s a lot of excitement right now around desktop virtualization, and that’s primarily the main point being talked about tonight and it certainly is a market, but is it fair to assume that in your 2010 guidance that we should expect to see a material financial contribution next year from this particular?

[Mark Templeton:]

I think the answer is yes. I mean absolutely, especially as you start thinking about the desktop business, which including both App and desktop together and that’s the way customers are looking to engage with us and obviously the way we’re delivering the solutions as part of XenDesktop 4. You’re right the license revenue was flat on a sequential basis, on a recognized. It was up on a bookings basis, if you include kind of a change in deferred that we’ve talked about a few times. We are seeing sequential progress across all Geos, whether it’s in actual bookings, whether it’s in pipeline build in growth, and in overall units. I think that’s the way you should think about it going forward and certainly into 2010.

[John Difucci:]

When I look at the year-over-year, it looks like it was still down a little bit more.

[David Henshall:]

It was down a couple points more year-over-year.

[John Difucci:]

Just to clarify here, too, on the pricing part, on the pricing side, I know you guys have come out with some new announcements, but the XenApp product has always been priced on a concurrent user basis, and there’s been some change, I believe, on the XenApp versus XenDesktop. Right now, when you’re buying the combination, you’re buying XenDesktop with XenApp included in it. That is priced today on a per seat basis, is that true, or is it concurrent?

[David Henshall:]

It’s priced and licensed on a per user or per device, so the customer can choose either/or or a mix of both.

[John Difucci:]

Wouldn’t that in itself increase the cost to the customer?

[David Henshall:]

Again, it depends on how the customer is using the technology. If you’re basically using the XenApp piece for, for example, John, remote access, then you’re going to be way better off from a cost point of view to stay with XenApp for remote access because, you’ve got an App or a suite of Apps, you’ve got 1,000 users and only 100 of them at a time are going to be using that suite of Apps. That’s always going to be a more efficient way to license a product where you’re doing a project and it’s a subset, etc. We have that product, and we’ve had that product a long time, that’s called XenApp. Nothing is changed there. It is license concurrent, and so forth and then the introduction of XenDesktop Enterprise and Platinum is really for the customer that’s looking beyond that subset, looking to a much broader deployment to use desktop virtualization in a much broader way, including App virtualization, including VDI, and including all of the FlexCast technology and methodologies that we include. So for that customer, they would assign a license to a device, and that device can be shared amongst unlimited number of users, or they assign a license to a user and they can roam between an unlimited number of devices and that really handles the two fundamental use cases when a customer is thinking of this strategically. So that’s how to think about the two spaces and two licensing methods.

[Operator:]

Your final question comes from Shaul Eyal - Oppenheimer & Co.

[Shaul Eyal:]

Two quick ones, starting with the housekeeping one, any foreign exchange impact this quarter?

[David Henshall:]

Yes, there was. Just to remind everybody, we sell predominantly in US dollars around the globe and so we don’t have an impact on the top line, but we do have a fair bit of local currency expenses. 25% to 35% of our overall expense base is in non-US dollars. Whenever the dollar weakens, we obviously have some impact to the downside. That’s where we’ve been over the last couple quarters. We do hedge out about six, nine months in advance, so it does kind of weave its way in on a bit of a delayed basis, but maybe a couple million dollars net negative in Q3.

[Shaul Eyal:]

Mark, on the XenDesktop side, can you talk about whether you’re currently seeing more Greenfield opportunities, or is it mainly replacement opportunities? I know maybe you don’t like to break it down, but maybe just provide us with some sort of color on that end.

[Mark Templeton:]

Actually, it’s pretty broad. Without being sort of rude about it we are seeing a fair chunk of business from customers that have tried first generation VDI and the user experience just not ready for primetime, whether the connection’s over the LAN or the WAN. So we are doing very well there and our partners are especially instrumental there because they’re out there with products from all the vendors. Secondly, the Greenfield is actually quite good, because what we’re seeing is that in the process of all the excitement we’re seeing demand pull, and especially from high levels in IT organizations. I’ve never seen us with more requests for executive briefings and engagements at high levels. Many of those, it’s hard to find one of those that isn’t already a Citrix customer at some level, but these are fundamentally Greenfield’s because the discussion is strategic across a pretty large architecture and set of goals around using virtualization at the desktop. So there’s a lot of Greenfield there and then I think as we’ve made this introduction this quarter with XenDesktop 4 with the trade up program, I think we’re going to see a lot of existing customers start to do two things. Step up to the trade up and start to implement XenDesktop 4, but also some of those customers are going to step out and say I not only want to trade up, I want to scale up and go for an ELA with you, which moves us from this average penetration of somewhere in the 15% to 20% of users in an enterprise to potentially 100%. So I think those are sort of from a color point of view, the three chunks that we see on a day-after-day basis.

[Operator:]

Ladies and gentlemen, at this time we have reached the end of the allotted time for questions-and-answers. I will now turn the back over to management for closing comments.

[Mark Templeton:]

Thanks again for tuning in today. Clearly, we’re feeling good about our execution. We’re at the center of really a remarkable transformation of IT, and as you can tell from the comments and our confidence, we really love the position that we’re in, really at the forefront in driving innovation, in driving licensing, in driving the marketplace forward. So the best is yet to come. Thanks again. We’ll see you in three months.

[Operator:]

Thank you for participating in today’s Citrix conference call. You may now disconnect.