(Reuters) - Activist investor Elliott Management Corp said cloud-computing software maker Citrix Systems Inc (CTXS.O) should sell some units, cut costs and buy back shares to make up for six years of underperformance.
Elliott, whose 7.1 percent stake makes it one of the top five shareholders of the company, said Citrix’s shares had the potential to reach $90-$100 by the end of 2016.
“It seems a little high to me,” RBC Capital Markets analyst Matthew Hedberg said.
“I wasn’t looking out quite for 2016, I was looking more shorter term, but we had thought upwards of $83 seemed possible in an M&A scenario,” he said.
Citrix’s shares closed up 6.7 percent at $70.39 on Thursday after touching a high of $71.46.
“The company’s stock price performance tells the story of deep underperformance across every relevant benchmark, including its closest peers, over every time period during the last six years,” Elliott wrote in a letter to Citrix’s board.
Elliott said the company should either spin off or sell its GoTo business, which provides online meeting service, and explore sale or strategic alternatives for NetScaler, which helps speed up Web-based applications.
“We expect more restructuring and pressure to sell pieces of the company or the overall business to private equity,” FBR Capital Markets analyst Daniel Ives said.
Citrix’s operating expenses have outpaced revenue growth and profit margins have contracted as the company expanded into non-core product categories, Elliott said.
Citrix said in a statement late on Thursday that it would review Elliott’s suggestions.
The company said in January it would cut about 700 full-time and 200 contractor jobs as part of a restructuring to improve operational efficiency.
Based on its calculations, Elliott said Citrix would have a buyback capacity of $4.5 billion-$5.3 billion through 2017.
Elliott said the measures it has suggested will help simplify the software maker’s cost structure, boost revenue growth and lower operating expense to around 54.5 percent.
Elliott has pushed for changes at several technology companies, including EMC Corp EMC.N, Juniper Networks Inc (JNPR.N) and Riverbed Technology Inc, often criticizing their strategy publicly.
Additional reporting by Liana B. Baker; Editing by Saumyadeb Chakrabarty and Sriraj Kalluvila