Cloud computing software maker Citrix Systems Inc. recently forecasted quarterly results below analysts’ expectations, leading to a 14 percent drop in its shares after the market closed. The company cited delays in closing big deals as customers reviewed IT budgets to cut discretionary spending. This warning from Citrix could impact other software companies as well, especially with the upcoming third-quarter reporting season. Companies in the cloud computing sector, such as VMware Inc., have also seen a decrease in deal closures due to customers reevaluating their budgets.
Cloud computing software allows users to access applications remotely from a central server, reducing costs by eliminating the need to update and install software on individual computers. The subdued spending environment experienced by infrastructure software companies has affected Oracle Corp. and Red Hat Inc. Citrix is now facing the same challenges, with its third-quarter earnings and revenue estimates falling below its previous forecast released in July.
Analysts believe that the weak outlook suggests a slowdown in sales of Citrix’s networking products, which had helped the company exceed estimates in the second quarter. The networking business, responsible for about 23 percent of Citrix’s sales, is under scrutiny as the company anticipates adjusted earnings of 68 to 69 cents per share on revenue of $710 million to $712 million for the third quarter. This is below analysts’ expectations of 73 cents per share on revenue of $737.3 million.
With the third-quarter results set to be reported on Oct. 23, Citrix’s stock fell to $57.51 after the close of trading. The company’s performance will be closely watched as it navigates the challenging market environment faced by cloud computing software companies.
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