Citrix 2014 Annual Report Download - page 26

20
addition, our European operations generally generate lower revenues in the summer months because of the generally reduced
economic activity in Europe during the summer.
If we fail to convert our free users to paying customers or retain existing customers of our Mobility Apps products, our
revenue and results of operations would be adversely affected.
Initially, many users of our Mobility Apps products utilize such products free of charge through free trials or freemium
versions of the products or lower priced/limited functionality versions of the products. We seek to convert these free trial users
to paying customers and, where appropriate, we encourage customers utilizing a lower priced/limited functionality versions of
our product to upgrade to higher priced/full functionality versions. If our rate of conversion or upgrade suffers for any reason,
our revenue may decline. We sell our Mobility Apps products pursuant to subscription agreements. Such customers may not
renew their subscription after their subscription period expires. We may not be able to accurately predict future trends in
customer cancellation, and our customers’ continuation rates may decline or fluctuate because of several factors, including their
satisfaction or dissatisfaction with our Mobility Apps products, the prices of such products, the prices of products offered by
our competitors or reductions in our customers’ spending levels. If our customers fail to renew or cancel their subscriptions for
our Mobility Apps products our revenue may grow more slowly than expected or decline, and our operating results and
financial condition could be adversely impacted.
Our success depends on our ability to attract and retain and further access large enterprise customers.
We must retain and continue to expand our ability to reach and access large enterprise customers by adding effective
value-added distributors, or VADs, system integrators, or SIs, and other partners, as well as expanding our direct sales teams
and consulting services. Our inability to attract and retain large enterprise customers could have a material adverse effect on our
business, results of operations and financial condition. Large enterprise customers usually request special pricing and purchase
of multiple years of subscription and maintenance up-front and generally have longer sales cycles. By allowing these customers
to purchase multiple years of subscription or maintenance up-front and by granting special pricing, such as bundled pricing or
discounts, to these large customers, we may have to defer recognition of some or all of the revenue from such sales. This
deferral, compounded with the longer sales cycles, could reduce our revenues and operating profits for a given reporting period
and make revenues difficult to predict.
Changes to our licensing or subscription renewal programs, or bundling of our products, could negatively impact the timing
of our recognition of revenue.
We continually re-evaluate our licensing programs and subscription renewal programs, including specific license models,
delivery methods, and terms and conditions, to market our current and future products and services. We could implement new
licensing programs and subscription renewal programs, including promotional trade-up programs or offering specified
enhancements to our current and future product and service lines. Such changes could result in deferring revenue recognition
until the specified enhancement is delivered or at the end of the contract term as opposed to upon the initial shipment or
licensing of our software product. We could implement different licensing models in certain circumstances, for which we would
recognize licensing fees over a longer period, including offering additional products in a SaaS model. Changes to our licensing
programs and subscription renewal programs, including the timing of the release of enhancements, upgrades, maintenance
releases, the term of the contract, discounts, promotions and other factors, could impact the timing of the recognition of revenue
for our products, related enhancements and services and could adversely affect our operating results and financial condition.
Further, we may be required to defer the recognition of revenue that we receive from the sale of certain bundled products
if we have not established vendor specific objective evidence, or VSOE, for the undelivered elements in the arrangement in
accordance with generally accepted accounting principles in the United States, or GAAP. A delay in the recognition of revenue
from sales of these bundled products may cause fluctuations in our quarterly financial results and may adversely affect our
operating margins. Similarly, companies that we acquire may operate with different cost and margin structures, which could
further cause fluctuations in our operating results and adversely affect our operating margins. Moreover, if our quarterly
financial results or our predictions of future financial results fail to meet the expectations of securities analysts and investors,
our stock price could be negatively affected.
Sales and renewals of our license updates and maintenance products constitute a large portion of our deferred revenue.
We anticipate that sales and renewals of our license updates and maintenance products will continue to constitute a
substantial portion of our deferred revenue. Our ability to continue to generate both recognized and deferred revenue from our
license updates and maintenance products will depend on our customers continuing to perceive value in automatic delivery of
our software upgrades and enhancements. A decrease in demand for our license updates and maintenance products could occur
as a result of a decrease in demand for our Workspace Services solutions and our Delivery Networking products. If our