Day 128: Citrix Systems Buy-Out?

The Mother's Little Helper portfolio was down -0.26% today for a loss of -$1,800.96. Overall gain to date: +$114,384.80 (+19.59%). According to CNN Money the S&P 500 is up +6.67% Year To Date (http://money.cnn.com/data/markets/sandp/).

Citrix Systems, our best performing company to date, appears to be in the middle of a bidding war. The stock is up 7.65% today as of this writing. According to sources at Bloomberg, three private equity firms; Bain Capital, The Carlyle Group and Thoma Bravo have all made bids for the Florida software company. Citrix Systems is not commenting on the rumors, but investors are taking it seriously enough to bid up the shares.

There is one question I want answered anytime there are rumors of a buy-out or merger; does this make sense? Some analysts have suggested that being bought by a private equity firm makes sense because Citrix is switching to a business model where clients pay for services via an annual subscription and that being a private company would allow them more flexibility to make this transition. This just doesn’t fully wash with me. Adobe has been very successfully selling its products via a subscription model for some time now, and they continue to trade as a shareholder friendly public company. There are a host of examples of public companies that switched over to a subscription model and have done very well without taking their companies private.

CEO Kirill Tatarinov, a former Microsoft executive in charge of Microsoft Business Solutions has been getting Citrix leaner and leaner ever since he became CEO in January 2016. In July 2016, in a deal with LogMeIn, Citrix spun off its GoTo product line, which included GoToMeeting, GoToWebinar, GoToWebcast, GoToTraining, GoToAssist and GoToMyPC, creating a subsidiary called GetGo. Then in February 2017, Citrix completed a merger in which GetGo became a subsidiary of LogMeIn for a cool $1.8 Billion.

With the completion of the Goto merger/collaboration with LogMeIn, a steady tightening of operations, a reduction of 700 employees, a cash cow of a subscription business and questionable reports of private equity buyouts (pay no attention to the deal behind the curtain), Citrix appears to be preparing itself for an acquisition. But with a $13+ Billion dollar market cap (Plus any premium on the sale), only a handful of potential corporate buyers could look at this deal, or a consortium of private equity firms. I’m going with corporate buyer. Citrix Systems would be a great asset to any company looking to grow and expand in the cloud and who can bring a large client base of government, education, healthcare, finance and manufacturing customers. I’m placing my bet on Seattle based Microsoft.

Earnings Calendar

Facebook, Masimo, Time Warner and RedHill Biopharma all reported today, I'm still waiting on Masimo to report. Facebook reported a good number and grew average daily and monthly users, but also announced that it would no longer report adjusted or non-GAAP numbers. This through off many analysts numbers and the stock traded down after hours. RedHill Biopharma was the big surprise when it reported that the company is debt free and has $61 million in cash to continue carrying out its commercialization plans in the U.S. Analysts expected a -0.64 cent loss but RDHL reported only a -0.05 cent loss, .59 cents better than expected.

Stay Invested,

Clay Baker

Disclosure: I am personally invested long in these stocks that appear in the MLH portfolio and may purchase or sell share withing the next 72 hours. I am also invested in other stocks that do not appear in the MLH portfolio: BA, BRK.B, CELG, CSCO, CTXS, CVX, DOW, DVAX, FB, IBM, NTES, NVDA, OMER, PFE, PG, RDHL, SCHW, THO, TWX, VEEV, VZ, XLNX, XOM

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.