Breakingviews: Elliott returns to haunt backsliding Citrix

Elliott Management rarely, if ever, returns to take on the same company for a second time. The activist investment firm is making an exception for Citrix Systems. It’s back to haunt the backsliding enterprise-software group.

Paul Singer’s firm has taken a stake worth more than $1 billion in the $13 billion Citrix, according to the Wall Street Journal. Elliott came knocking in 2015, brandishing a list of gripes, including a depressed stock price, burdensome non-core products and sagging margins. Elliott Managing Partner Jesse Cohn gained a seat on the board while the company ditched assets and its chief executive. Elliott exited the investment and Cohn stood down in 2020.

Since then, however, Citrix shares are down around 25% even though its products, which let employees access computers remotely from other devices, are tailor-made for the work-from-home reality created by the ongoing pandemic. Operating margins slipped from 31% for the quarter ending June 2020 to 26% for the same period this year.

Dealmaking with a whiff of mission creep has returned: Citrix in March bought Wrike, a software-management system for marketing professionals, for $2.3 billion. Chief Executive David Henshall said in a recent letter to shareholders that progress migrating to the cloud was slow going.

Shares of rival VMware, which majority owner Dell Technologies is planning to spin off to shareholders later this year, are up 5% since the start of 2021, while Citrix stock is down by nearly a fifth. That could be what’s motivating Elliott to dust off its margin- and discipline-enhancing playbook and potentially push for another new boss and a sale. Like last time around, offloading Citrix to a private equity buyer could be an option: The buyout industry has a record $2.8 trillion of so-called dry powder, essentially investing capacity, according to research firm Preqin.

It’s a case of déjà vu for Citrix and Henshall. For Elliott, if reforming the enterprise-software company’s bad habits worked once, it could work again.

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