VMW) and Red Hat ( RHT), which have enjoyed above-average multiples and P/Es of 45 and 53, respectively, are perfect examples. Unfortunately, the growth expectations presumed by these valuations have not manifested into results. In the case of Citrix, which has established itself as the go-to vendor for IT virtualization services and remote desktop technology, the company is rethinking its approach because enterprises are delaying system upgrades. Now, given VMware's relative performance, I do believe Citrix's struggle is more market-related than, say, a lack of execution. The dismal numbers we've seen from enterprise titans IBM ( IBM) and Oracle ( ORCL) supports this theory.
While Citrix management has done a decent job meeting analysts' estimates, the entire virtualization market is going through a transitional period where strategic partnerships with, for instance, Cisco ( CSCO) have been advantageous to both Citrix and VMware. But there are also signs that the market has gotten saturated. To that end, investors should also focus on how Citrix performs in product and license revenue, which have been less than stellar of late. It will be encouraging if Citrix can regain the momentum it demonstrated earlier in the year when that business posted growth of 17%. Last but not least, revenue from license updates will give investors insight to how strong of a pipeline management has built in terms of recurring business. The strength of Citrix's pipeline has (in the past) helped the company offset the weak corporate spending environment. Follow @saintssense This article was written by an independent contributor, separate from TheStreet's regular news coverage.