UPDATE 1-Citrix guides results below expectations; shares dive

Wed Oct 9, 2013 6:28pm EDT

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(Adds details, background, analysts' comments; updates share movement)

By Neha Alawadhi and Aditya Kondalamahanty

Oct 9 (Reuters) - Cloud computing software maker Citrix Systems Inc estimated quarterly results below analysts' expectations as businesses delayed contracts, sending its shares down as much as 14 percent in extended trading.

Cloud computing companies such as Citrix and VMware Inc have been facing delays in closing large deals as customers review IT budgets to prune discretionary spending.

Citrix's warning could set the tone for other software companies as it comes just ahead of the third-quarter reporting season. VMware shares fell 3.3 percent after the bell.

Cloud computing software allows customers to access applications remotely from a central server, and reduces costs by eliminating the need to upgrade and install software on each individual computer on site.

"It has been a soft spending environment for infrastructure software companies as seen recently by Oracle Corp and Red Hat Inc," FBR Capital Markets analyst Daniel Ives said. "Citrix is the latest victim."

In September, Oracle forecast sales and profit below expectations for the quarter ending Nov. 30, while Red Hat said it was under pressure to maintain billings growth.

Citrix's profit and revenue estimates for the third quarter came in below its own forecast issued in July.

Analysts said the weak outlook indicated that sales of the company's networking products, which helped it beat estimates in the second quarter, could be slowing down.

"I think when you have a miss of $25 million, it raises the concern that the weakness has spread to the networking business," said Raymond James analyst Michael Turits.

The networking business, which makes products that help improve the performance of Web applications, accounted for about 23 percent of Citrix's sales in the second quarter.

The company, scheduled to report third-quarter results on Oct. 23, said it expects adjusted earnings of 68-69 cents per share on revenue of $710 million-$712 million.

Analysts on average had expected earnings of 73 cents per share on revenue of $737.3 million, according to Thomson Reuters I/B/E/S.

Citrix shares were down 14 percent at $57.51 after the bell. (Editing by Saumyadeb Chakrabarty)

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