Technology companies, particularly those with an enterprise bent, appear to be coming under increasing pressure from activist investors who want to squeeze out profits at the cost of products and jobs. Last year EMC pressed by an activist investor eventually sold the company to Dell for $67 billion. Citrix is the latest company facing this issue –and from the same investor as it turns out.
It’s been a busy week for Citrix, a company focused on desktop virtualization and networking. Just yesterday, it sold its cloud management products to Accelerite, and on the same day announced that it had acquired Comtrade’s SCOM management packs for Citrix users.
What these moves show is that Citrix is in the midst of a pivot where it is trying to shed products that it sees as outside of its core mission, while making the occasional acquisition to augment that mission. That means products like Citrix CloudPlatform and CloudPortal Business Manager are out of here and the Comtrade SCOM management packs are coming into the fold.
Last November, the company announced it was spinning out its GoTo products such as GoToMeeting, GoToMyPC and other products into a separate company.
There are also layoffs involved here with 1000 jobs expected to be cut from the GoTo move alone. The company had over 9000 employees worldwide prior to the layoff announcement.
Citrix has indicated it wants to concentrate on core products such as XenServer, NetScalr and perhaps Citrix Workplace Cloud, but it’s not necessarily making these moves because it wants to change direction.
Instead, it turns out that Citrix is under pressure from activist investor, Elliott Management. If you’re not familiar with Elliott, they are the same firm that bought a $1 billion stake in EMC in 2014, and immediately began putting pressure on the company to sell its 80 percent share in VMware. Eventually EMC sold the whole firm including the VMware piece to Dell for $67 billion. That sale is expected to close later this year.
In a case of ‘Deja vu all over again’ Elliott has taken an activist investor role with Citrix as well, pushing the company to make some moves it might not necessarily have made otherwise.
These are not the only tech firms in which Elliott has shown interest. As eWeek reported in October, Elliott has its fingers in a lot of tech deals. The MO is often the same. Elliot buys a stake, then secures a couple of seats on the board and starts pushing for substantive changes in direction.
The question is why a private equity firm like Elliott is suddenly smitten with these large enterprise tech companies. R Ray Wang, who is principal at Constellation Research says it’s because it can extract some money from them.
“The private equity firms are targeting tech companies because their growth rates of 10 to 20 percent may seem slow for tech, but are high [compared to] other industries. They are in the midst of squeezing these companies for cash and forcing M&A across the board,” Wang told TechCrunch.
EMC sold the company before it was forced to make other moves it didn’t really want to make. Citrix wasn’t so lucky, dumping product lines, cutting jobs and much more. These companies could be the beginning of other similar activity by investors like Elliott as large tech companies under pressure from smaller, more nimble competitors become targets of these types of firms.
Citrix did not respond to a request for comment before we published this piece. If they do, we will update the story.