思杰系統 (CTXS) 2007 Q4 法說會逐字稿

Good afternoon. My name is Lanie and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Citrix Systems fourth quarter and full-year 2007 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer period. (OPERATOR INSTRUCTIONS) Thank you. I would like to turn the conference over to Mr. Eduardo Fleites. Sir, you may begin your conference.

Thank you, Lanie. Good afternoon, everyone, and thank you for joining us for today's call where we will be discussing Citrix' fourth quarter and fiscal year '07 financial results. Participating in the call will be Mark Templeton, President and Chief Executive Officer, and David Henshall, Senior Vice President and CFO. This call is being webcast with a slide presentation on the Citrix Systems investor relations website, and the slide presentation associated with the webcast will be posted immediately following the call.

Before we begin the review of our financial results, I would state that we have posted product classification and historical revenue trends related to our four product groupings to our website. As we get started I want to emphasize that some the information discussed in this call may be characterized as forward-looking statements made pursuant to the Safe Harbor provisions of the U.S. securities laws. These statements involve a number of factors that could cause actual results to differ materially, including: Risks associated with the Company's businesses; involving the Company's revenue; growth; products; their development and distribution; product demand in the pipeline; economic and competitive factors; the Company's key strategic relationships; the effect of new accounting pronouncements on revenue and expense recognition, including the effect of FAS 123(R); on certain of the Company's GAAP financial measures; acquisition and related integration risk's. Additional information concerning these factors is highlighted in the earnings press release and in the Company's filings with the SEC, including the Safe Harbor disclosure contained in our most-recent 10-K filing available from the SEC or the Company's investor relations website.

Additionally, during this call we will discuss various non-GAAP financial measures, as defined by SEC Regulation G, of certain adjusted figures, which include operating expenses, gross and operating margin, operating and net income, and earnings per share. The most directly comparable GAAP financial measures and the reconciliation of the differences discussed on today's call can be found at the end of our press release dated today and on the investor relations page of the Citrix Systems corporate website.

Now I would like to turn it over to David Henshall, our Chief Financial Officer. David?

Thank you, Eduardo, and welcome to everyone joining us this afternoon. This is the report on fourth quarter and fiscal year 2007 results for the Company. As you can see from the numbers we closed out 2007 with a great fourth quarter, completing another record year for Citrix, demonstrating strong demand and momentum throughout the business and continued execution against our strategy. Q4 results were highlighted by outstanding revenue growth in our PS Platinum and NetScaler products, as the investments we've been making in development and go-to-market infrastructure continue to drive market growth. In total we reported quarterly revenue of $400 million, up 24% over Q4 '06, and a total of $1.4 billion for the full year. Product license revenue for the quarter was $178 million, also up 24% over last year, adjusted operating margin of 25% for Q4, and adjusted EPS of $0.49 for the period and $1.59 for the full year, so overall, solid results for the quarter and the year across all product groups and geographies.

Next, let me provide a little more color on the four main product areas and the trends in those businesses that we saw during Q4. First, our App Virtualization products, which provide customers the best way to manage and deliver Windows applications. In total the group grew 16% year over year to $285 million in Q4 revenue. For the full year the group grew 15%. The key driver in Q4 was the continued success of the Platinum edition of Presentation Server 4.5, contributing 26% of total App Virtualization license revenue.

As we've seen in prior quarters, the strong demand for Platinum is driving an increase in ASPs and average deal size for new customers in this business. In fact, during the period there were six PS Platinum deals greater than $1 million, demonstrating the strategic value that customers are experiencing with this solution. Looking forward we now believe that PS Platinum could contribute upwards of 30% of new App Virtualization license revenue for the full-year 2008. Also, existing customers are also renewing Subscription Advantage contracts at strong levels, about 85%, helping to drive an increase in deferred revenue by over $47 million sequentially.

The second area of focus I want to cover is our App Networking business. Total revenue in this group accelerated to $48 million for the fourth quarter, an increase of 48% year over year. For the full year we recognized $155 million in total revenue, up 42%. The primary driver here is the NetScaler product line, both in terms of the Platinum edition, about 15% of the mix, and the success we've had in diversifying our customer base. Of the transactions greater than $50,000 in the quarter, about half came from traditional enterprise accounts. And as we've discussed in prior quarters, we're focused on building out our capacity to service App Networking customers, and while still a work in process, we've doubled field sales and SE head count since last year. One example of this expansion has been the Pacific region, which had a great quarter with NetScaler, growing over 50% from the prior year.

The third product area I'd like to highlight is our success delivering software as a service through our On-Line Services division. Citrix On-line delivered another great quarter, with revenue of $59 million, up 37% from last year. For the full year Citrix On-line grew 44% to $214 million. This result is the tangible payout of our continued focus on the SMB market, with products that are simple to use and predictably priced. The growth in this division continues to be led by the realtime app collaboration solutions, delivering 79% year-over-year revenue growth. In 2008 we're going to continue working on expansion into international markets and adding operational capacity to meet the growing user demand, increase efficiencies and ensure reliability. While it's going to take time for these investments to add to the profitability of the division, these are examples of how we plan to invest for growth and compete vigorously to expand our market leadership.

The last area I'd like to touch on is our new business in Server Virtualization markets. After closing the acquisition of XenSource in Q4, the business delivered approximately $2 million in revenue, at the top of our prior guidance range. Also, as forecasted, the total impact of the acquisition was dilutive to adjusted EPS by about $0.03. In 2008 we expect about half of XenServer bookings to be driven by OEMs, with these partners preparing to launch new product offerings in Q2. Since we receive royalties one quarter in arrears, new OEMs will begin contributing in Q3. Therefore, revenue will be skewed towards the second half, as we've said in the past, with the first half focused on building out a go-to-market foundation. Mark's going to provide more details on this business later in the call. So in total, looking across all of the product areas, we're happy to have delivered this kind of record performance, giving us a solid foundation and a momentum as we enter into 2008.

Now let me talk a little bit about expenses in operations in the quarter and some of the items that impacted the Q4 results. Operating expenses were $271 million, up 27% year over year and up 15% sequentially. Overall, compared to last year the increase was driven by several factors, primarily head count additions, increased variable selling costs, and the OpEx associated with the acquisition of XenSource. So the largest unique expense item in Q4 was sales commissions, which were up several million dollars. This is primarily caused by all GO's exceeding their internal plans and by specific sales incentives on PS Platinum and NetScaler products designed to drive strategic initiatives, the strength of which were evident as reported revenue results. We expect to return to a more normalized commission rate in the first quarter.

Regarding head count, we currently have about 4,600 employees, up over 300 from last quarter. Included in this number are about 85 people that joined the Company through the XenSource acquisition. The largest increases overall continue to be in the sales and services team, focused on Server Virtualization and Application Networking. And finally, our adjusted tax rate in Q4 was 14%, as compared to the 22% rate we posted in Q3 '07. While the continued strength of our international business helps keep the tax rate down, the biggest driver here was a one-time benefit from the reduction of tax contingencies related to prior years.

So turning back to the balance sheet, we currently have $860 million in cash and investments. In fact, we generated $112 million in cash flow from option Q4, bringing the 12-month total to over $420 million, both records for the business. After closing the XenSource acquisition in Q4, we increased the pace of our repurchase program, spending about $200 million to retire roughly 5.4 million shares. In order to continue this program through '08, the Company's board has just authorized a $300 million increase to our repurchase program, giving the Company a total of about $330 million in the program as we enter into the first quarter. So overall, looking at the results, I'm really pleased with the Q4 financial performance. We've continued to execute against our strategy while delivering strong growth and profitability.

So finally I'd like to discuss our current outlook and expectations for the first quarter and for the full-year 2008. Before we discuss numbers, though, let me provide you with a context around our forward outlook. Obviously we're continuing to see solid demand across multiple areas of the business. We're also optimistic that our strategy is becoming more mainstream for customers and the investments that we've been making will help sustain our momentum into future quarters. We're unchanged in our position regarding the huge market opportunity in front of us, and while carefully monitoring the broader economic climate, we'll continue to make those investments to strengthen the competitive advantage of our solutions, as well as our ability to effectively reach more customers around the world.

So turning back to the numbers, for the first quarter of 2008 we currently expect total revenue in the range of $367 million to $377 million, and included in this is XenSource revenue of $3 million to $5 million and On-Line Services of $61 million to $62 million; interest income in the quarter of $10 million; adjusted tax rate, 23% to 24%; shares outstanding, 194 million to 195 million shares; and adjusted EPS in a range of $0.33 to $0.35. For the full-year 2008 we're providing guidance for the first time, and our current outlook is total revenue in the range of $1.615 billion to $1.645 billion, and adjusted EPS in a range of $1.61, to $1.64 per share. Included in these amounts is our prior guidance regarding the impact of the XenSource acquisition, and just to remind everybody, we expect $50 million in total revenue and total expenses of $60 million to $70 million for the year. So these investments plus the additional shares that were issued for the acquisition will generate dilution of between $0.15 and $0.20 for the full year of 2008, with the dilution being modestly front-end loaded in the year.

Now I'd like to turn it over to Mark to give you additional details on the quarter's performance and discuss our ongoing businesses. Mark?

Thanks, David. We had an extraordinary fourth quarter, capping off yet another outstanding year; 23% growth in revenue, 18% in product licensing, just a fantastic 2007. In fact, I can't remember a year in Citrix' history where our product, message, team and strategic foundation grew as broadly. We drove consistent execution and made solid investments in people, facilities and systems, all extremely essential for Citrix to go mainstream.

So first I'd like to briefly cover three highlights from last year. First, we really improved our focus in App Virtualization and acceleration, introducing new Platinum editions of Presentation Server and NetScaler. Growth there was great and competitively we enhanced the products that differentiate Platinum, releasing 8,0 versions of Access Gateway and Edge Sight, launching WANScaler and Provisioning Server, and introducing the EasyCall Gateway. Secondly, we enhanced and updated all of our go-to products again, including full support for Windows Vista, along with additional investment in our On-Line virtualization platform to fuel growth from new geographies and products we'll introduce in 2008.

And third, we extended our market opportunity to include desktop and Server Virtualization, with the strategic acquisition of XenSource adding XenServer v4 to the product portfolio. And we announced our virtual desktop infrastructure solution, XenDesktop, a product that allows leverage of Citrix' technical competencies and go-to-market partnerships going forward. So, great financial results and a winning strategy. Citrix is emerging with what we need to become the head-in for IT services, delivering apps and desktops from a very dynamic server infrastructure, and ultimately driving the transformation of the data center into the delivery center.

So now I'd like to turn your attention to 2008. Net-net we're feeling really good about 2008 business, looking at leading indicators, our game plan for the year and the strategic pipeline of products and partnerships we have lined up. We enter the year with solutions that are known for delivering strong ROI and fast paybacks that leverage existing IT investments. Strong growth of our '07 license update and tech services means Citrix' infrastructure is becoming more important than ever. We're clearly more prominent on the IT strategic radar. No doubt these characteristics will be valuable in 2008, as everyone in the tech industry faces potential economic headwinds, including Citrix.

So next let's talk about our 2008 priorities. First up, App Virtualization. Today the PS product line is the only infrastructure that offers a universal way to deliver Windows-based apps without ever installing them, on both the server and the client. The Platinum edition goes even further, providing lower TCO, better security, higher performance and a richer user experience. Last October we enhanced Platinum with the addition of EasyCall and SmartAuditor features. In Q1 we'll enhance it again, driving PS Platinum as a mainstream way to deliver Windows apps without installation. As I talk with customers, I see the intrinsic value of App Virtualization becoming more relevant and better understood by IT organizations all over the world.

At the same time, we've made a huge investment in the Delaware release of Presentation Server that leverages both Windows Server 2003 and the terminal services enhancements coming in the release of Windows Server 2008. So in 2008 we'll actually relaunch Presentation Server in the market as the only solution that can virtualize Windows applications dynamically on both the client and server. a powerful differentiator that brings the benefits of App Virtualization to both office and mobile workers for the first time ever. The relaunch process will begin soon in conjunction with the upcoming launch of Windows Server 2008. The excitement kicks off in late February, so stay tuned for that.

Next I'd like to talk about web app delivery. We're coming off a strong second half performance, entering 2008 with momentum in the web app delivery market. NetScaler continues to move up the stack, providing advanced web app delivery capabilities for both our internet-centric and enterprise customer bases. NetScaler continues to power most of the world's top internet sites. We have great velocity there. This year we'll be putting added focus on the enterprise segment of web app delivery. We like what we're seeing in some of the better wins from Q4 and other leading indicators. Enterprise pilots and trials are up and we're seeing some conversions to deployments and bigger projects. And cross selling is gaining traction, as existing Presentation Server customers are now implementing NetScaler for their web app delivery needs.

Competitively we're making lots of end roads in many classical load-balancing customers, and we've recently experienced very impressive growth in net new customers, growing over 80% in the latest quarter. NetScaler 8.0 and NetScaler Platinum drove second-half momentum. leveraging the addition of the expert policy engine, user experience monitoring, integrated SSL VPN, and the industry's toughest app firewall. Our 2008 product roadmap looks just as strong, with a next generation platform coming, with impressive advances in scalable, acceleration, app availability and lower TCO, exactly what it takes to serve both internet Citrix and enterprise customers. So, we're well positioned with an exciting game plan for 2008 in web app delivery.

Next, On-Line Services. Citrix On-Line delivered another strong quarter, driven by continued demand from customers of all sizes, taking advantage of our simple-to-use, purpose-built remote access, support and collaboration services. In 2007 we crossed $200 million in sales, placing us in the top tier of all FAS providers. As we evaluate our On-Line business segments, On-Line remote access is maturing, on-demand support has global opportunity, and real-time collaboration is really quite strong. \This has guided our priorities as we begin the buildout of significant infrastructure to support growth, with a goal of maintaining our number one position with GoToMyPC and expansion of that product line, and to support GoToMeeting and GoToWebinar, which solved nearly 90% attendee growth in 2007. So, significant investments are being made to enhance our collaboration market position in 2008 and beyond. We'll save the new product and feature announcements for later this year, but suffice it to say, we're aiming to significantly raise the bar in the real-time collaboration experience yet again.

GoToAssist has led the On-Line support market for a long time. To optimize our position we've begun the process of more finely segmenting the customer base, separating the corporate customer from the prosumer. This is the strategy behind our recent release of the beta version of GoToAssist Express, our new easy-to-use support solution for very small businesses and professionals. If you provide support for your children, mom or dad, or close friends, whether they have a Mac or a PC, you should try GoToAssist Express. The beta response has been just amazing.

Next I'd like to talk about our newer virtualization opportunities. IDC projects worldwide spending on virtualization software and services to be $15 billion by 2011. Our XenServer and XenDesktop products firmly position us to tap into server and desktop virtualization segments beginning in 2008. This year, in Server Virtualization we're preparing ourselves to ramp up and reach takeoff velocity. The sales integration team has been maniacally focused on hiring the team and recruiting partners since we closed the transaction on November 1st and I'm really delighted with the performance. We exceeded our goal of 1,000 reseller authorizations, exiting the year with 1,600 Citrix partners authorized to sell XenServer. We launched a completely virtual On-Line tool for both sales and technical training, free for Citrix partners and customers. Hundreds of partners are training themselves, preparing for the XenServer launch during Summit '08. In addition, we also on-boarded approximately 60 new people to the XenServer team and added about 400 new customers in Q4.

Many new customers are early in conducting initial projects and smaller implementations, all based upon XenServer v4, leveraging the product's fast time to value and high performance, seeing the power of XenMotion, and enjoying compatibility with their existing storage infrastructure. Our target is to deliver $50 million in '08 revenue and to create a great trajectory for 2009. Our execution focus will include ramping up channel partners, spinning up our OEMs and working more closely with Microsoft across all aspects of enterprise virtualization. Next week at Summit we'll formally introduce the XenServer product family to our channels. We'll demonstration the simplicity and power of XenServer and how to attack the high-volume, mid-market opportunity for Server Virtualization. Partners will hear about 2008 demand programs, adviser rewards and selling incentives, and they'll learn how to get trained and certified quickly. Our goal is to execute, one, with over 2,000 resellers authorized for XenServer, with improving partner productivity being our focus going into the second half.

Another dimension in our strategy includes OEMs. Both software OEMs and server hardware OEMs will be very important in our go-to-market mix. We've already announced relationships with NEC, Dell and HP, fueling our mutual goals to drive greater use of virtualization in new x86 server shipment's. Our strategy also includes a strong alliance with Microsoft in virtualization and continuing our amazing rate of innovation on the Windows platform. Yesterday we made some announcements with Microsoft across application, desktop and Server Virtualization. All have been received very enthusiastically by employees, partners and customers. On the server side we announced that a future release of XenServer will also support and interoperate with Microsoft Hyper-V Hypervisor, as well as their system management framework, Microsoft Systems Center.

Embracing and expanding the Windows platform is a core competency for Citrix. This will bring much of XenServer's current capabilities to Hyper-V and introduce new dynamic virtualization services, such as real-time VM streaming, interoperability. high-performance storage and high availability. As a whole, we believe these announcements will grow the primary demand for Server Virtualization exactly where the money is, running Windows workloads. As exciting as the Server Virtualization market has been, data center usage is still pretty narrow. The biggest potential clearly lies ahead.

The other announcement yesterday was about desktop virtualization, partnering with Microsoft there and placing another key brick in the foundation of our desktop delivery game plan. First, a little background. In October we announced XenDesktop, our end-to-end system for virtual desktop infrastructure. In November we made the XenDesktop tech preview kit available for free download, giving customers a first look at our solution. We've had to date about 11,000 downloads of the system, with a significant number of pilots beginning and excellent response from early adopters. At Summit we'll unveil our business strategy to our partners showing them how to introduce the most powerful virtual desktop infrastructure to customers, the XenDesktop product family.

XenDesktop integrates five components that are absolutes for successful desktop delivery: First, an enterprise-class virtual machine infrastructure; second, a high-speed desktop delivery controller; third, on-demand desktop image provisioning; fourth, a hi-fidelity user experience; and fifth, broad compatibility with desktop appliances, local peripherals, storage management, disaster recovery, and system configuration tools. Yesterday's joint announcement with Microsoft was a watershed event for the virtual desktop market, with a strong Microsoft market endorsement, improved BECD pricing and licensing, and planned addition of graphics processing technology in the core Windows platform. This marks the initial step in a longer-term plan to collaborate with Microsoft in desktop virtualization. Together with the announced go-to-market partnership we'll deliver the best TCO and user experience in virtual desktops. XenDesktop is now entering full beta test status with a planned release late in the first half.

Last, I'd like to discuss how we'll be taking all of this to market. In 2007 our go-to-market formula focused on enterprise buyers in the app delivery line of sight, leading with the Platinum editions of Presentation Server and NetScaler. In 2008 we'll focus on four product lines: XenServer in the Server Virtualization market, focusing on the volume mid-market customer; Presentation Server in the App Virtualization market, focusing on Platinum and moving entry-level customers to mainstream implementations; NetScaler in the web app delivery market, focusing on the enterprise customers with the advantages of the Platinum; and XenDesktop, winning the hearts and minds of early adopters in desktop virtualization.

Next week during our annual Summit conference we'll step up training and authorizations across our end-to-end product stack. Our channel partners will learn how to lead customers with the Platinum difference and to tell a business-oriented, high-impact story, leading to more professional services, bigger deals, higher ASPs, and more customer intimacy for our valued partners. We'll continue to give our partners the training incentive, products and support they need to engage across multiple buyers within the enterprise and with the strategic IT buyer. Summit '08 will be our most exciting ever, and as always we'll have some surprises to share.

So. to summarize our 2008 priorities, first, we'll further strengthen our position in App Virtualization by relaunching Presentation Server product family, driving aggressive PS Platinum revenue, and leveraging the new Windows Server 2008 platform. Secondly, increasing our share in enterprise web app delivery, improving the capabilities of NetScaler Platinum, and releasing a next-generation platform that pushes the envelope on scalability and extensibility. Third, we'll begin to build on the scale-out investment we're making in our On-Line virtualization platform to further penetrate the SMB market, to provide new products, to globalize into new geographic markets, and further simplify our customer experience. Fourth, we'll build velocity and go-to-market capacity in desktop and Server Virtualization by ramping our channel and OEM programs throughout 2008, by leveraging our Microsoft partnership as you saw in yesterday's announcements, and by introducing enhancements to both XenServer and XenDesktop.

And finally, we'll step up the volume of our app delivery message to drive our end-to-end system concept, increasing our breath of partnerships and improving the cross integration of our products into a system. This will begin to provide our customers the integration capabilities needed to unlock much more of the value in our infrastructure. This is our plan to continue our growth, in top-line revenue, in market penetration, in customer value, and in go-to-market horsepower.

Wrapping up now, I'm really excited about our Q4 performance, exceeding expectations for the quarter, posting record revenue of $400 million, growing 24% over last year, and wrapping up the year with an impressive $1.4 billion in revenue. I'd like to thank the Citrix team, our partners and customers. Our vision, execution and financial results have put us in an amazing position, a position to drive the transformation of the data center into the delivery center.

So next I'd like to open it up for Q&A.

(OPERATOR INSTRUCTIONS) Your first question comes from the line of Michael Harris of Raymond James.

Hi, guys, good evening.

Hi, Michael.

Could you give us this quarter what the growth rate was in Presentation Server license revenues?

Sure. The just pure Presentation Server license revenue actually had a fantastic quarter. It was up over 15% on a year-over-year basis.

Okay. And then can you also give us an update on how you're doing with -- how you did with WANScaler on a revenue basis in terms of partners and also where you are in terms of partners on the -- on NetScaler, particularly abroad?

Sure. Let me take the WANScaler piece first. Continues to track in line with our original expectations. For the full year we did about $8 million, maybe a little over $8 million. We had talked about a range of $8 million to $10 million, so continues to do okay I'd say is probably the way I would describe that. Our bigger focus is not necessarily on the standalone WAN market, as we've talked about a few times.. It's really on providing things unique to our end-to-end strategy of the data center to the desktop, and being able to optimize the traffic that's unique to the Citrix solution. And that's really where I think you should expect to see this product -- product roadmap go throughout 2008.

Okay. And it looks like you had a nice uptick in renewals on SA. Anything particular to get that -- got that going back in the right direction?

SA's continued to be very strong for really the entire year. We had renewal rates of broader Subscription Advantage in the mid-80s, which is a rate that we were able to reach last quarter. I think probably the bigger story there and the underlying is -- the underlying primary issue is the number of customers that are using this opportunity to either get on to SA that have lapsed or the ones that are using us to upgrade to the Platinum technologies, as they see the broader benefit to their business by expanding to the adjacent products inside the broader Platinum product.

Okay, thanks very much. Nice quarter.

Your next question comes from the line of Phil Winslow with Suisse.

Hi, guys, good quarter. Just wanted to dig in a little bit on just your expectations for Platinum going forward. You said it was going to be eventually 30% of license sales next year. How do you see that affecting not only your top-line expectations for just license growth when you look at Presentation Server, but also how does that impact the margins of this business, just given the higher ASP but not necessarily as an [increment] amount of incremental cost?

That's a good question, Phil. I think that -- we're extremely happy with the success we saw in Platinum in Q4 and really for 2007, the full year. We're entering the year with over 20% contribution and that's certainly at the top end, if not the above the original range that we had talked as, frankly, a stretch goal. As we go into 2008 we talk about up to 30% contribution across that product family, and that's one of the things that's going to help really keep all of that virtualization license growing in this range that has moved from last year I'd call it low single-digits up through the mid single-digit range as far as our forward outlook. We're not quite in a position yet to increase the range up to this mid teens that we seen over the last couple of quarters. I think we've a lot of things going on in the App Virtualization business throughout 2008, which Mark alluded to in his comments, and we'll continue to work through those. But we're very happy with the contribution and think it's going to be one of the things to really help drive this business with this kind of growth into the future.

Then, when you guys do look at investments for 2008, you talked obviously on the Xen side, but when you do look at just the core spending where would you expect to focus, on the sales and marketing side or more so on R&D?

Both. I'd say largely moving -- leveraging the go-to-market side. We've got a lot of things we're doing around Xen, obviously XenServers and desktops, and we're still work in process across the whole App Networking business. There's so many geographies that we're really undermanned, We need to continue to make these investments. And probably the last thing is investments in the channel. A lot of the heavy lifting is still being done by Citrix across the App Networking business and we'll really see the leverage when we can drive it into the channel the way we have with some of our other products.

Great. Thanks, guys.

Thank you.

Your next question comes from the line of Adam Holt with JPMorgan.

Good afternoon and thanks for taking the question. My first question is a follow up on the Presentation Server outlook for next year. You talked a little bit about the impact of Platinum on a going-forward basis, how does your mid single-digit growth expectation reflect any impact from either the Windows 2008 release or the impact of Delaware, how should we be thinking about that?

Well, I think there it's -- there's nothing explicit. It's all implicit in there right now. We've had great success with this business over the last several quarters. We've got some real tough comps going into 2008, and we still think that we'll be able to grow this business faster than we have historically. The upcoming launch of our Delaware product, which is really leveraging all of the strength around server 2008, very excited about that; that's coming later this year. And we think we've got some new things coming down the pipe.

If I could just shift to the On-Line business, also maybe to get a little more granularity on the growth trajectory for the year. Obviously another good quarter in Q4. The guidance would imply another strong growth quarter in the first quarter. How should we be thinking about the sustainable growth in the On-Line business?

There's probably a couple of things going on there. If you look at the underlying markets and just take them in -- really in the aggregate, across the board they'd probably be growing about 20% to 25%, and so obviously we've been continuing to take share for a number of years and we'll continue to throughout 2008. The subsegments of those markets, as Mark mentioned, remote app -- or remote desktop access, more mature markets, slower growth. The bigger opportunity going forward is really going to be around real-time app collaboration. The extensions of the GoToMeeting product family, in particular, helping drive that business. So I think that you'll start to see different things across the products as far as growth rates, and then we'll continue to outpace the market. We'll obviously have a slowing growth rate that we've seen for quite sometime and been talking about pretty consistently, just the pure law of large numbers. But think of it as a little bit faster than the overall markets as we continue to take share.

And if I could ask one more question, David -- and sorry to nickel and dime you on the expenses for the fourth quarter -- but is it possible to get to the level of detail to call out what was commissioned expense that was one-time oriented toward the fourth quarter versus operating expenses in the fourth quarter that might set the table for the first half?

Yes, I'll give you a ballpark. Variable stuff related to people exceeding plan and being into, quote, acceleration, the things pretty unique to Q4 I would peg of north of $5 million.

Terrific. Thanks for the time.

You bet.

Your next question comes from the line of Todd Raker with Deutsche Bank.

Yes, nice quarter. Mark, if you -- can you give us a little bit of oversite in terms of Microsoft? I was wondering if you could dig in economic-wise, how is the relationship evolving and do you see a day when Microsoft potentially resells part of the product portfolio?

Gee, Todd, that's not in, I don't think, either company's game plan. I think at this point we see too many opportunities to work together at technical and product level and go-to-market level in complementary ways for that to really make any business sense. And I think that our role in the partnership is obviously to create solutions certainly around market segments and we believe large scale niches and market segments, and Microsoft's role is to build a really more and more robust platform for us to build on top of and think that that's where the symbiotic relationship comes from, as long as we're doing our job in solutions and obviously with innovation and so forth and driving marketed option and Microsoft's doing their job in a platform where they get paid licensing when we're successful. And I think it's really a simple formula and I don't see any economic reason to change it.

Given that response, what's the risk that you miss the window with them, meaning, Microsoft got Meridian out in the market and pushing it seriously and it emerges as the other major player in the space and Xen never just hits critical mass and gets taken seriously?

I think your question is about XenServer and Server Virtualization.

Yes, clearly.

Specifically, yes. And with XenDesktop and obviously there's a tremendous amount of the XenServer technology that's inside of XenDesktop. It's really a separate business and we think a completely greenfield-type marketplace. But when it comes to Server Virtualization, I think that as we see the size of the market, the number of servers and the value-add opportunity as we engage with customers and partners, we think that we can build in the server virtualization market the similar kind of symbiotic relationship with Microsoft that they've -- that we had with Presentation Server, which then puts them notionally in every sale that we make or many, many sales that we make at least in the future, and that's how the economics in a relationship works. In that kind of model, we'll be -- in a great outcome we'll be the third player in server virtualization and we're -- we think that's a great role for us, given that our focus is not in the silo of server virtualization.

Our focus is in how we tie all of this together -- virtual servers, virtual apps and virtual desktops -- into an infrastructure that actually can be married to business initiatives that are measurable. So it's a very different focus and it's what allows us to work very nicely with Microsoft, I think, in server virtualization and in a complimentary way, even in many ways to VMware. So that's our game plan and we're sticking to it.

One quick follow up, is it fair to assume that the $50 million this year and the $200 million next year around Xen is predominantly server driven?

Yes, think you need to assume that for this year although when we provided the guidance we were sort of -- we were providing guidance as it related to the acquisition and we didn't really try to separate out desktop and server. But this year is -- we still believe that it's a year for piloting and trials, et cetera, when it comes to virtual desktops and that there won't be significant revenue this year from that part of the market and that most of it will be coming from Server Virtualization.

Okay. Thanks, guys.

Okay, thank you.

Your next question comes from the line of Katherine Egbert with Jefferies.

Hi, good afternoon. I have a couple more questions on Xen. So you laid out the milestones when you announced that acquisition. Can you tell where you are vis-a-vis those milestones, like signing up a certain number of channel partners, for instance?

Sure, Katherine. When we made the announcement I think we just talked about a few metrics and the first one was the one we just talked about and that is the $50 million in revenue for 2008. Secondly, metrics around partnerships on the channel side and we -- when we made the acquisition and closed the deal, the XenSource team had about 400 partners that had been authorized and trained and what we said was that our goal was to exit 2007 with 1,000. So adding 600 for the stub period between November 1st and the end of the year and then to exit Q1 of this year with 2,000, and then to finish this year with 3,000 authorized resellers. And I think as you heard in my -- and I don't think we really had many other metrics or any other metrics. Certainly we talked about building the team and how we would do the integration on the sales side to incubate Server Virtualization in our overall sales and services organization.

But in all of those metrics I think we've so far exceeded the goals we set out, which I think at the time everyone thought were pretty lofty. So we completed the year instead of at 1,000 resellers authorized, we exited with 1,600 resellers authorized. And that really sets us up to be, I think, in good shape exiting Q2 to probably exceed our goal of 2,000 authorized resellers and then puts us in good stead for the year, so we're feeling really good about the metrics.

Let me just add to that, Catherine, that the only oth -- the other metric we talked about was around employees and we had said that we were about 85 people coming on board as part of the acquisition, looking to grow that to about 350 by the end of 2008. I will say as part of the hiring numbers that I talked about before, about 60 of those were related to new people on Xen, so we're had tremendous success in the early days bringing people on board, particularly in the go-to-market area, so we're really happy with the strength there.

Okay. One other metric, actually, the delusion. Can you tell us the revenue -- quarterly revenue run rate where XenSource breaks even?

It's a two-sided metric. It depends on the investment level, obviously, but I think at this point in time that we're expecting breakeven probably right about early 2009.

And what revenue run rate would that be?

From a loading standpoint we're probably -- 70% will be back=end loaded this year, so we'll give you north of 20.

Okay. fair enough. And then just last if I can. Can you just comment on Microsoft buying Calista. what will you make of that?

Sure. A technology acquisition that Microsoft intends to put in the core Windows platform to improve the remote graphics experience for desktop virtualization, especially, I think. And a platform and technologies that ISVs, like most things in the Microsoft platform, become things you can build on top of and innovate on top of. So overall a good announcement. The timing of when it becomes part of the Windows platform, the specific features and value-add interfaces, et cetera, it's way too early for Microsoft to be announcing that. But, good -- a stronger windows platform means better value-added products that we could build.

Okay, thanks. Good job.

Thank you.

Your next question comes from the line of Brian Essex with Morgan Stanley.

Hi, good afternoon. I was wondering if I could dig in a little bit more the Presentation Server results and fantastic results for the quarter. What is your sense in terms of upside to your original numbers? How much of that was faster-than-anticipated adoption or larger-than-anticipated install base? And then there's a part two to that question, what are you seeing in terms of economic impact to your forecast? Were there concerns you had last quarter that you just didn't see materialize? And then going into Q1, do you have those same concerns or do you still not expect to see as much of an impact as maybe the other segments of the industry see?

Sure, Brian, let me talk about the Presentation Server business first, specifically. We exited, as I mentioned a minute ago, with about 15% year-over-year growth in that business, which is as strong we've seen really any time in the last many years, and a lot of that was driven by just upside with the Platinum edition. We're having great traction there, it carries a higher ASP and it's driving, obviously, from a mix standpoint a higher ASPs for the whole business and larger deal size, so we're getting good traction there. I'd say we're also seeing good upgrade activity. About 28% of total Platinum came from upgrades in the quarter. People upgrading their prior versions of Presentation Server to take advantage of the broader solution, which is great. I think going forward, similar to what I said a few minutes ago, we're now in a position to say that it's not a single-digit growth license business. It's now a mid- single-digit growth business with some potential to go faster, and we're pretty excited about what we can do with Platinum over time.

As far as trying to dig into what's imbedded simplicity or explicitly regarding the broader economy, I'd say that there's nothing that's specific in there. We continue to look at the same metrics that we always do; pipeline, coverage ratios, deal size, channel leverage, et cetera, et cetera. And I'd say that nothing really unique popped out in Q4, whether it was on a specific geography or a specific industry vertical.

Okay, is there a -- kind of as a follow up to that, is there a particular vertical that's changed over last year, not much of a financial services impact as you may thought? And then do you get the feeling that you have the same visibility or same degree of visibility from the channels this year as you did last year?

[I'd say] on the vertical question, there's really no change. We continue to have strength from our traditional verticals, but if you recall our business is extremely diversified, so we never have more than 10% or 15% coming from one particular vertical in any quarter. The one thing that we did see was actual -- a lot of new strength in financial services across our App Networking business in certain places, which is good. So I don't think I would expect to see much of a change going into 2008.

Great. Thank you very much.

Your next question comes from the line of Israel Hernandez with Lehman Brothers.

Hey, guys. Can you talk about your hiring plan for 2008, how does that -- how that compares with 2007, what particular areas are you going to be making the most investment, and are you making any changes to that plan in light of the macro environment that we're all facing?

Sure, Israel. We hired about 900 people in 2007 and I actually look forward -- I that a nice round number for 2008 is about 200 people per quarter, and that would be largely focused on the XenServers and desktop business, both in go-to-market and in development capacity. And the next area would probably be in go-to-market activities for the App Networking business. As far as how we adjust that based on broader economic climate, I think this. Probably the simpler answer is that we always look at hiring as probably our largest variable -- variable expense that we have going into a new quarter, and we base that largely on what we're seeing in real time in our business. And again, we're looking at the same metrics that we are looking out across doing our other forecasting, whether it's coverage, et cetera, et cetera. So if we're faced with a broader economic decline, then we would address that in real time. So at this point continue to focus on the things that are going to drive the strategy and allow us to service more customers.

Thank you.

Your next question comes from the line of Rob Owens with Pacific Crest.

Good afternoon, everyone. Could you maybe talk a little bit about your key points of differentiation with NetScaler versus the competition, what you're seeing on pricing? Are you finding that you're winning because of functionality or are you getting more aggressive on price? And lastly, with the new Montreal release from F5 today, is that something that you'll follow suit with or are you more focused on the mid range of the market? Thanks.

Sure. First of all, on Montreal it's been, obviously, rumored that it would be -- it would appear and I understand that it has been announced this afternoon. Don't know a lot about it myself and we've been, obviously, doing a lot of work on our next-generation platform to prepare for when Montreal would show up. I think Montreal and the way it's been built, however, is really driving more toward the service provider segment, and the focus that we've had with the NetScaler platform, as I mentioned in the commentary, is basically the internet-centric segment and the enterprise segment. And so that'll continue to be our game plan from a product point of view and take service provider opportunities with partnerships as they occur. And we think there's more opportunity there with partners than to try to go after the service provider segment in a frontal kind of way. So with the NetScaler platform, the feature capabilities are really designed more for the enterprise to be a complete integrated advanced web app delivery controller that frees enterprise customers from the kind of complexities that they end up having to design into web applications in order to make them secure and higher performance and more scalable. And that's our message and that's what differentiated NetScaler.

As you saw last year when we announced NetScaler Platinum with the addition of the app expert policies and really bringing a visual capability to that and putting in firewall capabilities that are heuristically driven that are way, way superior to what anyone else has, putting the SLVPN in the box. And then even adding our click-to-call capabilities, these are all differentiating factors that allow NetScaler to be the front end of the web application, designed into the architecture ahead of time, providing, yes, all of the load balancing and all of the things that second-generation load balancers do, but going way beyond that and really being a permanent front end for a web app. And I think that's what differentiates the NetScaler product and strategy and you'll see that continue to play out in 2008 as we step up the underlying platform to handle more capacity in a way that actually will save customers money, as well as delivering a lot more capabilities, Web 2.0 app, et cetera.

And then in terms of what we have seen in the marketplace, I think I mentioned that we had a great net add of new customers, especially in the enterprise segment in Q4, which has been a big focus for us and we really haven't had to do odd types of pricing or any of that. In fact, as a software company, we really don't speak that language. We speak the language of value, demonstrate and defend our value, and then hopefully the customer then decides in our favor, and when it get downs to just a price war and so forth we're just not hardware guys that are good at doing that. And we think that when you that you may lose a deal, but with the differentiation we're building around software and the strategy and how this will play forward we think that those deals are not permanently lost, so we'll just get them on the next cycle. So that's how we look at the NetScaler business and working with customer in that market segment.

Great, thanks.

Our next question comes from Sarah Friar with Goldman Sachs.

Good afternoon, guys. Two quick questions. David, great out performance on the top line, but you effectively took it and spent it away. And I know you walked through that some of that was just sales kickers kicking in, obviously, but to what extent were you able to at least pull forward some of the planned investment for '08 in terms of hiring that could then allow us to see a little bit more leverage in the back end of the year? Is that a fair way to think about the model?

Well, let me take the first part first -- the first question first. I think from a sales commission standpoint there's -- in Q4 there's always the point where a lot of people hit their annual number and they start moving into acceleration and then some specific incentives around Platinum and things that help drive that number into more of an exponential curve, and so that pops in. And I think I'd addressed it when Adam asked the question about -- with the variable impact of that and it was north of $5 million in the quarter. So that was certainly one of the items that was driven by the big, big upside you saw, not only in the revenue performance but in the deferred revenue performance, as well, because bookings were just tremendous in Q4.

Right.

And then I think as far as pulling in hiring, things like that, we never make a practice of pulling stuff or pushing it out per se. I think that when we find the best candidates and the right candidates that we're looking for in certain areas, we'll be aggressive against them, and we were in Q4. Obviously we saw lot of strength in the business, felt good about doing that, and wanted to make sure that we didn't lose those people. I think they're going to pay off nicely in 2008.

And does that give us though -- just think being how you plan for it, does it give us a little bit more leverage toward the back half of '08, assuming the top line keeps coming in the way you'd thought about it?

Well, I think the next year -- and I think most of the models are reflecting this right now is that there's certainly more leverage in next year, but the largest issue being just the Xen business really coming on line. It's pretty dilutive, obviously, in the first couple of quarters and then showing less and less dilution, obviously, as you move into the back end of the year. And also seeing just the productivity of a lot of the investments coming on line, be it people focused on the channel or for Application Networking specifically. So I do think there is more leverage in the back half of next year and certainly into 2009, as we go accretive with Xen and start moving forward there.

And then a second question on your view from customers on spending, doesn't sound like you guys are really seeing anything slowing yet, but as you get into conversations about budgets, we're definitely hearing from CIOs that budgets are being cut back. How does Citrix fit in to the extent the budgets start to get cut. What's the cost reduction story you guys can tell?

Sarah, this is Mark. I think that of all infrastructure vendors Citrix has one of the best reputation for measurable, tangible ROI and fast payback, whether it's reduction in network utilization and communications costs, or whether it's utilization of administrative resources more broadly, or if it's the speed to a particular application deployment, whether it's SAP or Oracle. We are very tied into so many of those projects in an ROI kind of way, so as we look at 2008 and when we look at the list of CIO priorities and imagine where they'd be drawing lines, I think that we feel really good about the place we are in, both our reputation and the defined value and the Presentation Server, in NetScaler. There's a big TCO story in NetScaler in terms of how you grow up a web app at lower cost. There's a great TCO story, obviously, in XenServer, and there's a tremendous potential TCO story in XenDesktop that has probably more -- it may actually accelerate the desktop virtualization market as CIOs look for places to get material cost savings. And clearly the difference between building out a virtual desktop infrastructure versus a broad desktop refresh for office workers, there'll be a huge difference there from a cost perspective.

So that's how we're feeling and obviously all of our On-Line Services have a TCO model as well, either like for a GoToMeeting, obviously, a strong TCO model related to travel cost would go to assist a strong TCO model related to first call closing of a problem in a customer care situation. So we obviously lean into more of these cost reduction operational efficiency messages and at the same time -- and that's a marketing statement -- and at the same time in selling what I think we've been able to demonstrate with a lot of customers that not only do you get the cost savings, you get this strategic more agile infrastructure that's then repurposable -- or more purposable in a changing business environment, so you get your cake and eat it, too.

Hey, Sarah, I just add one point on top of that, is that our average transaction value is still relatively modest, given most infrastructure software companies, and because of that -- we're just not selling a lot of make-a-deals out there, ones that are very easy to do -- to defer from quarter to quarter based on budgets. And so, hopefully we'll continue to keep the deal count up and focus there.

Great, that's helpful perspective. Thank you.

Your next question comes from the line of Steve Freitas.

Hi. Good afternoon and well done today.

Thanks, Steve.

Now I'm just wondering, there's been a lot of M&A activity in the virtualization space, obviously, and so as you build your stack, both on the service side and desktop side, I'm wondering what's you disposition regarding M&A or do you feel like a lot of the tools that you need for some of the dynamic virtualization services that you talk about are available in house?

Steve, it's -- as always we won't and can't make statements about potential deals, but I'd that, first of all, our bias is to build and the XenSource team that came over has great talent for building and our support for Microsoft Hyper-V Hypervisor and the announces we made, many of those things are really in the roadmap being built. At the same time, obviously venture capital has flowed very nicely to the virtualization space and it's really a rich environment for looking at potential M&A, but what we'd rather do is actually look mostly at the field and try the partner in an ecosystem kind of model. And I think that's where the biggest opportunity is. And yes, there may be a small deal here or a small deal there, but the overarching opportunity is to try to actually build up the ecosystem. So we'll be doing some things in 2008 that we'll start talking about next week at Summit that really empower that ecosystem further, and I think that's how we answer your question and our view on M&A at this point.

Fair enough. And then I guess secondly, can you give us a total customer count for XenSource? I know you gave us customer adds this quarter, but what is the total?

Steve, I don't have that off the top of my head. I don't think David does either.

No.

He's shaking his head.

Okay, I'll circle back. Thanks.

Okay.

Your next question comes from the line of John Walsh with Citi.

Good afternoon. Just a couple of questions on Xen. What type of customers are adopting it that you've seen so far? I know it's a small number, but any color on the types of customer or the types of uses that you see in that $2 million of revenue that you saw in Q4?

Well, John, so it -- obviously it is -- it will segment out. We do have OEM licensees, mostly in that number on the software side, and those tend to be very specialized and very enterprise-oriented kinds of deals. And the other piece, obviously, is more channel driven and that's all shapes and size. I would say there are a lot of trails going on, mid-market type customers, very much a sweet spot for us overall, especially through our two-tier channels. And so I wouldn't -- it's very, very varied and so I wouldn't be able to give you any more detail than that.

Okay. And then the $200 million 2009 number, any update or color or higher or lower confidence in that number? I know it's only a couple months later, but is that still a good number as far as you see it?

Our point of view hasn't changed there, John, and the magic to 2009 is the take-off velocity that we reach in '08, and that's why so much energy, investment and focus of the Company, including how we're incubating the sales and services team, et cetera, is -- has been built and why the first half is really focused on getting that channel platform in place so that we can begin to see the uptake in the second half. And, or course, the same thing goes for our OEM partners, especially on the hardware side, [renting] them up as well.

And any feedback from the channel as far as what the competition or with VMware being out there as the 800-pound gorilla, any feedback that you've gotten on where you think you're going to maybe find some areas that they haven't addressed, or do you think a lot of it's going to be head-to-head competition? Just any color there.

Yes, I think that the feedback from our partners is fantastic. We wouldn't have the kind of authorization rate that we've seen if there wasn't a keen interest and view on really taking XenServer into the higher volume mid market where you get -- you got lots more middle sized companies where you can make an impact with a XenServer where the simplicity -- the performance on Windows workloads, the compatibility with existing storage infrastructure, things like this, the manageability. Kind of all of those things are much, much easier to own and therefore on the uptake to put in place for one of our partners. And as I said and we've said as Company before that we don't expect our partners to -- to leave their VMware franchise. We think there's plenty of market for multiple-grade companies and products in the server virtualization space, and we haven't seen anything to change our point of view there.

Great, that's helpful. And just one quick one. Presentation Server, any update on the number of licensed users? I think they've given out 18 to 20 million historically, any update on that number? Thanks a lot.

Yes, I think it's still in the general ballpark We added somewhere between a half a million and a million per quarter and obviously have some that don't renew their subscription, so we let them fall off the list. Still in the ballpark, roughly 20 million.

Great, thanks.

Your next question comes from the line of Brent Williams with Benchmark Company.

Hi, guys. I want to just build on Sarah's question earlier. As you suggested and as I recall from back the last time that you -- the world faced major economic headwind, you're right, the cost saving story is a really shining advantage that Citrix has, so how long -- let's suppose that we woke up tomorrow and the headwinds became a hurricane, how long would it take to really recast the marketing message to really put go-to-market programs in place around just really poinding that message to people and to really refocus that, especially with eye towards helping the channel really reorient itself?

Brent, I think not any time at all, honestly, because this is a core property of the product. It's not a -- a convenient property of our products in hard times, it's just a core property of the product and I think that's given us the kind of -- if you look at the last five years I think -- I don't think we've had a year where we grew less than 23%, right, and a lot of that is really off the notion of a strong PCO, strong measurable ROI and pay back kind of model. Because remember, the last five years IT spending has been running -- growth rate has been running somewhere between 3% and 5%, so 3% to 5% underlying in total spending in a Company growing 23+ % over the last five, six years, that has to come from having that strong ROI as part of the core property. And then we've obviously laid on top of that necessarily to drive ourselves up the stack -- up the mainstream stack with enterprise, especially enterprise customers, many of the more strategic kind of messages that relate to agility and the ability to try and drive business change in a world that's very dynamic.

But we shouldn't say that that's instead of the ROI and operating efficiency message. It's in addition to -- and I think as I said and a couple people here chuckled when I said this to Sarah, and that is -- and that's why an investment in Citrix' infrastructure you kind of get your cake and eat it too, because you get that operational efficiency across lots of dimensions and you get the kind of flexibility you need so that when things do change you're not rebuilding all this infrastructure. You're pointing it in a different direction.

Great. And then just, David, on the large deal activity in Q4, can you give us any tangible indication of what the large deal, million dollar and up deal picture was?

Yes, overall -- let's see, I think we had 11 -- 11 transaction greater -- 11 or 12 greater than $1 million, which is obviously the biggest of the year. We usually have between three and five, so typical of a Q4 tends to be our largest. Of those, as I said before, a lot of them were PS Platinum transactions and the other being PS enterprise. There were certain customers in the networking business that totaled over $1 million in total purchases, but we don't actually count them on that list because it was made up of multiple different PO's throughout the period.

Okay, that's it for me. Thanks for taking my questions.

Yes, thank you.

Your next question comes from the line of Walter Pritchard with Cowen.

Hi, guys. Just a couple trailing questions here. In 2007 you were pretty aggressive on the sales promotion side, and I'm just wondering, as you enter 2008 here, are you expecting to be as aggressive and drive a similar -- I guess you've got two things going on in sales marketing. You've got the Xen, so I guess I'm wondering more on -- you isolate the Xen investments, on the other parts of the business are you going to drive the same level of sales promotional activity this year as last?

Sure, Walter. I think that -- if you look at why you do promotional activities across the board, a lot of them are to really establish new businesses, generate traction and momentum, and really from a channel standpoint encourage them to invest in the business, to broaden the available pipe of leverage from a customer perspective, and I think we've been pretty successful on that front. And similar for the internal sales teams, to get them really focused on understanding the message, being able to help customers and feel very confident selling these brand new products. And I think that when you look at where some of the promotions were in '07 around -- really around Platinum and around the Application Networking products, we've really established those and been very, very successful, so we're in a position where we can really back-off any type of special promotions.

And from a channel perspective there's still certain things we want do around additional investment for App Networking (inaudible). I think there's a lot of customer leverage that we can still drive there by helping the customer -- helping our channel partners get more comfortable selling these solutions and better trained, and really investing in those incremental head count inside their own organizations to drive Citrix solutions. And, of course, Xen. New markets, XenDesktop and XenServer, we'll do some things around that going forward, as well.

Got you. And then just around Windows Server. It's been five years since a major Windows Server release and I guess it may not be really a fair comparison to look back five years ago at your numbers and try to see if there's any -- how the impact played out, if any, so I'm just wondering, Mark, maybe if you could take us back to that point and how does the market generally react to a Presentation Server purchasing around a Window Server release, or is there any meaningful impact?

Yes, Walter, there really has historically never been any meaningful impact and I think a lot of it has to do with the really simple notion that a new Windows Server release always takes some time to go from the lab to actual deployments in the data center and -- so that's one piece, so there's no immediate impact. And then secondly, because we've had a subscription model on license update for such a long time there's no connection between where I am with Windows Server and where I am with Presentation Server, and so that gives customers -- actually it's one of the core feature of subscription in that it's a -- it virtualizes, if you will, the version and where you are with Presentation Server from the version and where you are with Windows Server underneath. And we expect to see a similar kind of thing with Windows Server 2008, maybe with a little bit of a longer cycle, given that it really is a radically new server infrastructure from Microsoft. We're really bullish on it. We love it, but we think it'll take some time for customers to uptake it from the lab to the data center.

Great. Thanks a lot for taking my questions.

Ladies and gentlemen, we have reached the end of the allotted time for questions and answers. I will now turn the call back over to management for closing comments.

Well, thanks again for joining us today and once again I'd like to just thank this Citrix team, our fantastic partner community, and especially our customers. Another tremendous year, tremendous quarter, and really setting us up for what are the most exciting times in the world ahead of us. So thanks and we'll see you in three months.

Thank you for participating in today's Citrix conference call. You may now disconnect.