Editor’s note: Citrix, which has a major presence in Raleigh where its ShareFile operation is based, is showing new life. Its first quarter 2016 earnings report reflects revenue growth being driven by its recent reorganization and consolidation as well as a refocused portfolio, writes Sanjay Medvitz of Technology Business Research.

HAMPTON, N.H. – Citrix (Nasdaq: CTXS) drove revenue growth of 9% and expanded operating margin to 13% in 1Q16 as it managed its transformation initiatives. The vendor cited strong performance from its NetScaler and ShareFile solutions, demonstrating its successful portfolio adaptation toward becoming a SaaS and cloud services provider.

During 1Q16 Citrix continued to execute on its long-term plan to drive operational efficiency and refocus its business strategy around core enterprise products including XenApp, XenDesktop, XenMobile, ShareFile and NetScaler. As part of Citrix’s portfolio rationalization efforts, the vendor will divest non-core assets.

Citrix announced plans to spin off its GoTo product family in November, and also announced the sale of its CloudPlatform and CloudPortal Business Manager products to Accelerite and the shutdown of Melio in January. TBR believes this illustrates the vendor’s willingness to shed assets outside of its core strategy and move forward with a much tighter portfolio.

In November Citrix announced plans to lay off roughly 1,000 full-time employees and contract positions. The layoffs are expected to be largely completed in early 2016 and exclude the GoTo spin off. These product and organizational realignments will allow Citrix to reallocate resources to its core product lines in an effort to bring a simplified go-to-market message that illustrates its renewed focus on application delivery and workspace management.

TBR believes the vendor’s reshaped portfolio will ultimately be easier for partners to sell, harmonizing well with its recent channel program updates.

Like other technology firms such as EMC, Citrix’s recent changes come on the heels of pressure from activist investment firm Elliott Management, which brought the vendor’s product strategy and execution into question in June 2015, resulting in the vendor’s strategic shift and the exit of CEO Mark Templeton.

In January Citrix appointed Kirill Tatarinov as its new President and CEO. TBR believes the former Microsoft executive’s experience driving product strategy and transformation will be extremely valuable to Citrix, as the vendor re-positions its portfolio and messaging, however, initial push back could surface internally as the company transitions to its first new CEO since 2001. Tatarinov’s relationship to Microsoft will also help strengthen its technology partnership with Microsoft, citing collaboration opportunities around Windows 10 and enterprise mobility during Citrix’s 1Q16 earnings call.

The spinoff of Citrix’s GoTo product family refocuses the vendor on the enterprise with its core applications and data solutions

In November Citrix officially announced its plans to spin off its GoTo business into a separate public company that will consist of GoToAssist, GoToMeeting, GoToTraining, GoToMyPC, GoToWebinar, Grasshopper and Openvoice. The move allows both Citrix and the newly established company to pursue growth initiatives in their respective markets with a refined strategy, go-to-market, and independent resource pools.

TBR believes shedding the GoTo family of products will help Citrix drive operational efficiency and concentrate additional investment on core products such as XenApp and XenDesktop as the vendor looks to provide best-in-class application delivery and workspace solutions.

Citrix announced Chris Hylen, senior vice president and general manager of Citrix Mobility Apps Business, will take over as CEO of the newly established company. In February Citrix appointed Kevin Parker, the co-founder and senior operating principal for Bridge Growth Partners, LLC, as chairman of the board to help develop the newly established company.

The GoTo business leaves with roughly $600 million TTM revenue and accounts for roughly 85% of Citrix’s SaaS revenue. TBR believes retaining ShareFile will prove important in continuing to generate SaaS revenue and maintain a collaboration product in its core strategy. The separation is expected to be completed in the second half of 2016.

Channel partners remain key as Citrix takes aim at opportunities within the midmarket

At the Citrix Summit 2016, Citrix reemphasized its midmarket focus as it aims to design services-based solutions around XenApp, XenDesktop and NetScaler solutions while transitioning more capabilities from its low-margin consulting segments to partners. In April the vendor announced major updates to its channel program, designed to increase partner profitability and incentivize partners to target opportunities in the midmarket.

As part of the changes, Citrix will offer a 7% upfront discount for new partner identified and qualified opportunities through its Net New Partner Sourced program which will launch May 9. Citrix is also clarifying its Citrix Advisor Rewards (CAR) criteria to drive solutions selling through increases interaction between partners and Citrix Sales, and creating a new Strategic Development Fund to lower partner marketing costs.

TBR believes increasing partner incentives is an important first step to help partners cost-effectively explore net-new opportunities in the midmarket where Citrix has less brand presence. We believe Citrix’s ability to tap midmarket and SMB customers will be critical to its growth trajectory moving forward.

Expect Citrix to focus on training and certification programs realignment as a next step to continue helping partners deliver solutions for midmarket customers. Citrix will continue to invest in and expand its Service Provider Program (CSP) as a critical avenue to help partners provide user and business-specific needs for individual midmarket customers where large amounts of customization and integration are needed from partners when customers lack the internal IT resources to do so themselves.