Citrix Joins Web-Acceleration Rush with NetScaler Deal

As vendors snap up Internet acceleration technology and performance management systems, the solutions provider pays $303 million to get in line.

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Citrix showed its commitment to Web applications Thursday, announcing that it will acquire NetScaler, a producer of Internet application acceleration systems, for a total of $303 million in cash and stock. NetScaler Inc., with 200 employees, is the fourth independent Web application acceleration technology company to be bought out in little more than a month.

In late May, Cisco Systems Inc. acquired FineGround Networks Inc. of Campbell, Calif., a producer of performance optimization appliances, for $70 million. In April Juniper Networks Inc. bought out Peribit Networks Inc. and Redline Networks Inc. for a total of $469 million.

NetScaler sells a line of application-acceleration appliances, gateways, switches and virtual private networks, designed to protect the security and speed up the performance of Web-based applications.

Citrix Systems Inc. acquired NetScaler to expand its product line to serve the increasing number of pure Web-based applications, said David Jones, senior vice president of corporate development with Citrix, based in Ft. Lauderdale, Fla.

Citrix produces application access technology that has been mainly focused on giving customers secure access to client/server applications, including applications that work with a Web-based front end.

However, license sales of applications that run entirely on the Web will overtake the total number of client/server application licenses by as early as 2008, Jones said. Citrix needs to be able to respond to customers demand for products that support the performance of, and access to, Web-based applications, he said.

"If you accept that a higher and higher percentage of the latest applications will be Web-based at some point, you need to [offer] something that is specifically designed for the Web," Jones said.

/zimages/3/28571.gifClick here to read an explanation from Juniper Chairmans Scott Kriens of why Peribit Networks and Redline Networks were important acquisitions for his companys product line.

Customers are moving to Web-based applications to take advantage of higher performance combined with lower deployment and maintenance costs, Jones said. NetScaler was attractive because it offers "a way to increase performance and reduce costs—that is our business," he said.

Citrix also focused on NetScaler, Jones said, because its technology has a prominent, if low-key, position on the Web. NetScaler claims that up to 75 percent of all Internet users access the Web through a NetScaler system each day.

Some of its higher-profile customers include Google Inc.,, Yahoo Inc., Earthlink Inc., the Microsoft Network, and E-Trade Financial Corp. It also has more than 500 enterprise customers and more than 3,000 installations of its products.

NetScaler technology will bring Citrix a deeper product line that will give customers a new reason to listen to a Citrix sales pitch, said Robert Whiteley, analyst with Forrester Research Inc. in Cambridge, Mass.

"Citrix has always had a reputation that they had a product line that was a mile wide and an inch deep," Whiteley said. With the NetScaler products, Citrix can promise to help with a larger portion of their customers application strategies, "which allows them to get away from that inch-deep mentality," he said.

It will also provide a new revenue stream that could push Citrix over the $1 billion mark in annual revenue, Whiteley said.

Citrix currently generates more than $800 million in revenue, and estimates that NetScaler will generate $58 to $60 million in additional revenue for Citrix in 2006.

Citrix expects to close the deal by the end of the 2005 third quarter. The company will pay 55 percent of the $303 million purchase price in stock and 45 percent in cash. Citrix will also assume $23 million in unvested stock options.

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John Pallatto

John Pallatto

John Pallatto has been editor in chief of QuinStreet Inc.'s since October 2012. He has more than 40 years of experience as a professional journalist working at a daily newspaper and...