Activist investor Elliott Management Corp. has purchased a stake of more than 10% in enterprise software maker Citrix Systems Inc., according to a new report.

The Wall Street Journal reported the investment late Tuesday, citing people familiar with the matter. Elliott’s stake is believed to be worth around $1.3 billion. The firm is reportedly looking to realize a return on its Citrix shares by persuading the company to implement business changes that will boost its stock price.

Citrix develops software that enables workers to remotely access business applications and virtual desktops. The company also has a presence in several other parts of the enterprise technology market. Citrix sells a project tracking platform that business teams use to keep track of outstanding tasks, as well as software tools that help information technology departments secure their firms’ business data and optimize networking infrastructure. 

The news that Elliott Management has taken a 10% stake in Citrix comes a little over a month after the company posted its second-quarter earnings results. In a shareholder letter accompanying the results, Citrix Chief Executive Officer David Henshall said the long-term revenue and profitability goals the company had set in late 2019 “will likely take additional time to achieve.”

The delay may have been one of the factors behind Elliott’s decision to invest: Activist investors often buy stakes in companies that they believe have an opportunity to boost their share prices by improving key financial metrics such as profitability and sales.

Citrix’s plan to boost its financial performance centers on the cloud. The company is currently in the process of refocusing its business model from on-premises software licenses to cloud services.

In the second quarter, software-as-a-service products accounted for 26% of Citrix’s total revenue. The company’s SaaS business saw its annualized recurring revenue jump 74% in the quarter, to more than $1 billion. Henshall told investors in the shareholder letter that the company will make a number of operational changes, including adjustments to its sales operations, to support the continued growth of its cloud products.

Another core component of Citrix’s SaaS strategy is Wrike, the cloud-based project management platform it acquired for $2.25 billion earlier this year. Wrike is used by business teams at tens of thousands of companies to keep track of outstanding tasks. Citrix said the platform added $160 million to its SaaS business’ annualized recurring revenue in the second quarter.

Elliott Management may seek to convince Citrix’s leadership team to change certain components its current growth strategy. The activist investor has already done so once before: In 2015, the investment firm sent a letter to the company arguing that it should take a new approach to boosting its stock price. The changes it proposed in 2015 included, among other items, the sale of certain business units.

More recently, a report published last year suggested that the activist investor had also taken a stake in Citrix rival F5 Networks Inc., which sells software products for managing and securing cloud workloads. The companies compete in the enterprise application delivery segment. Elliott Management’s stake in F5 as of 2020 was believed to be under 5%. 

Shares of Citrix climbed nearly 3% today on the news of the activist investor’s involvement.

Photo: Citrix