Citrix Systems Drops as Chairman Quits - TheStreet

Updated from 1:34 p.m. EDT

Citrix Systems

(CTXS) - Get Report

announced Friday that its chairman had resigned in the wake of a recent profit warning, a significant drop in its stock price and the filing of more than a half-dozen class-action suits on behalf of shareholders.

The news put further pressure on the applications-software company's shares, which dropped another 18% Friday, trading down 4 1/16 at 18 11/16, after hitting a 52-week low of 18 1/2. Citrix's stock is down more than 80% from its high of 122 5/16, which was reached in early March.

Under the management shake-up, Edward Iacobucci, Citrix's founder and chairman, will be replaced by Roger Roberts, the former chief executive. Roberts will also serve as chief operating officer while the Fort Lauderdale, Fla.-based company searches for a new chief executive to replace Mark Templeton, who will remain at Citrix as president.

Earlier this month, Citrix's stock

plunged 46% after the company warned that it expected second-quarter profits of 9 cents to 11 cents a share, about half the consensus Wall Street estimate for the quarter and considerably lower than its earnings of 16 cents a share in the comparable quarter of 1999.

The company attributed the anticipated drop in earnings on numerous factors, including a slower-than-expected expansion into the Asian market, a failure to anticipate changing trends in the way software is developed and an overestimation of

Microsoft

(MSFT) - Get Report

server operating system sales, on which the company heavily relies. Citrix supplies server products that help manage applications designed for Microsoft's Windows operating system.

Envisioning "similar challenges" in the future, John Cunningham, Citrix's chief financial officer, said Citrix's missteps this quarter could set the company back by three to six months in terms of targeted growth. He said the company must refocus its efforts on increasing its large licensing agreements, which take six to nine months to generate revenue, instead of relying on packaged software sales, which produce profits in as little as 90 days.

Since Citrix warned of the earnings shortfall on June 12, Wall Street analysts have revised estimates for second-quarter earnings down to 10 cents a share. Citrix is expected to report its earnings for the quarter on July 19. Five brokerage firms have also downgraded the company's stock over the past two weeks, including

Prudential Securities Inc.

, which now rates the stock a "hold."

Still, at least six firms still rate the stock a moderate to strong buy, including

Dain Rauscher Wessels

, which downgraded Citrix shares on June 9 to a "buy aggressive" rating from "strong buy aggressive." The company does not underwrite the stock.

"It's a good rating, but with a long-term focus," said Dain Rauscher Wessels analyst Sarah Mattson, who maintains a 12-to-18-month price target of $40 a share. "I don't see a lot of catalysts in the short term to get the stock to go in the other direction, but in the long term I think the stock will do better."

In addition, at least a half-dozen shareholder lawsuits have been filed this month asserting that Citrix's senior executives made "false and misleading statements" about the company's financial condition over the past nine months, causing the stock to trade at artificially high prices.