Citrix buys NetScaler for $397.5 million

Citrix Systems agreed to acquire application acceleration hardware vendor NetScaler for around $300 million in cash and stock.

Citrix Systems agreed Thursday to acquire application acceleration hardware vendor NetScaler for around US$300 million (AU$397.5 million) in cash and stock.

NetScaler makes application appliances that handle such tasks as load balancing, content caching and remote-access functionality. Its customers include Google, Amazon.com, Microsoft's MSN and Ticketmaster; NetScaler estimates that as many as 75 percent of Internet users pass through a NetScaler system each day.

The company also focuses on optimizing delivery of custom Web applications and ERP (enterprise resource planning) applications like those from Siebel Systems, SAP and Oracle. That market is where Citrix sees NetScaler's technology complementing its own flagship Presentation Server for managing and deploying enterprise applications, according to David Jones, Citrix's senior vice president of corporate development.

"There has been increasing pressure on us to do something specifically designed and optimized for Web applications over all kinds of networks," Jones said. "There are immediate benefits for Presentation Server customers to deploy [NetScaler's technology]."

Fort Lauderdale, Florida-based Citrix plans to let NetScaler continue operating fairly autonomously in San Jose, under the leadership of current NetScaler Chief Executive Officer (CEO) B.V. Jagadeesh. NetScaler will be renamed the Citrix Application Networking Group, and Jagadeesh will report to Citrix CEO Mark Templeton. Citrix expects to retain most of NetScaler's 200 employees, Jones said.

Pending shareholder and regulatory approvals, Citrix expects the deal to close in the third quarter, after which it will immediately begin offering NetScaler's products through its own channel. Seven-year-old NetScaler is privately held. Citrix valued the deal at US$300 million and said it will pay 45 percent of the purchase price in cash and the rest in shares of its stock.

Citrix has used several acquisitions to expand its product line, including its US$50 million purchase last year of SSL VPN (Secure Sockets Layer virtual private network) vendor Net6 and its 2003 buyout of GoToMyPC maker Expertcity. Jones said Citrix has retooled its acquisition strategy following the "difficult" integration of its first major purchase, its 2001 takeover of portal software maker Sequoia Software. On its next major deal, Expertcity, Citrix decided to let the company continue running separately, a strategy that has paid off through a smoother transition.

"That's definitely the model we'll employ with NetScaler," Jones said. "They're in a hypergrowth phase right now. We're going to let them continue to run."

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