Citrix Systems Inc. (NASDAQ:CTXS) is set to report earnings after the close today.  Because of past options reviews and its old listing issues this may only be a partial or preliminary report that only shows revenues.  First Call has estimates at $0.38 EPS and revenues at $339.7 million.  Next quarter estimates are $0.45 EPS and $373 million; and Fiscal-2008 estimates (very wide range) appear to be $1.75 EPS and $1.57 Billion revenues.

In prior periods this might not have garnered enough enthusiasm for its own preview, but after it announced XenSource for $500 million it became a more focused interest as a virtualization stock.  That deal is expected to close this quarter. As per its comments: This acquisition moves Citrix into adjacent server and desktop virtualization markets, expected by Citrix to grow to nearly $5 billion over the next four years. None of the results from XenSource will be included in Q3 earnings, but it’s a safe bet that the focus from Wall Street will be covering the virtualization push.

Citrix shares closed at $32.27 the day the XenSource deal was announced.  Shares now sit up above $41.00 and over the last few days this was on new year highs at $42.75.  Analysts have an average price target around $43.00.

Citrix also extended its virtualization alliance with Microsoft (NASDAQ:MSFT) in September by standardizing on the Microsoft® Virtual Hard Disk (VHD) format as a common runtime environment for both virtualized operating systems and applications.

We won’t start drawing the EMC (NYSE:EMC) comparisons for the value that VMware has added in relation to XenSource.  The companies are very different and the company can’t (or at least shouldn’t) make too many robust comments on a pending or developing issue.  But despite the major size differences between these companies, it is quite likely that VMware traders and investors will be looking to see how much focus Citrix gives to virtualization.

• VMware’s magic starting to look like wizardry….
• Microsoft comes into the fray.

Jon C. Ogg
October 17, 2007

Jon Ogg is the publisher of the 24/7 Wall St. Special Situation Investing Newsletter and he does not own securities in the companies he covers.

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