Citrix CEO Selling Shares Into VMware/Virtualization Strength (CTXS, VMW)

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Citrix Systems, Inc. (NASDAQ:CTXS) announced after today’s close that Mark B. Templeton, its President & CEO, is adopting a prearranged trading plan for the exercise of 763,017 expiring stock options and the sale of the underlying shares of common stock. The options are due to expire in the beginning of 2009.

The plan is established with the guidelines specified by Rule 10b5-1 and under the company’s policies with respect to sales of shares held by directors and officers. Appropriate filings reporting the sales will be made with the Securities and Exchange Commission when the sales are completed under the trading plan.  10b5-1 sales plans are nothing less than a "planned and gradual share sale" and are usually tied to many of the same restricted employee sale blackout dates.

These shares will be sold by March 31, 2009. Under the terms of the plan, but Mr. Templeton will have no discretion or control over the timing or effectuation of the sales. The plan also contemplates the exercise and hold of 21,922 stock options and the sale of an equivalent number of Citrix shares Mr. Templeton already owns. Citrix noted that Mark Templeton currently owns 158,951 shares of Citrix common stock. Other than the transactions noted above, Mr. Templeton confirmed he has no plans to sell these other shares.

We haven’t calculated the cost basis of the options to determine an implied net cost basis for the stock.  But at today’s $42.06 closing price, if the cost basis was zero and if the shares were all executed at today’s price this share sale would represent a net sale before fees of $32,092,495.02 before the additional share sale contemplation.

Citrix shares have risen from under $35 to over $42 since it acquired XenSource, the virtualization play and competitor to the mighty hot VMware (NYSE:VWM).  Citrix shares are up roughly 50% over the last year and are back within sniffing distance of two-year highs.  The recent popularity of VMware for traders as "The Next Next Thing" has undoubtedly led to stronger Citrix interest.  It has now closed the XenSource deal and the VMware Q&A session from analysts this week was full of questions regarding running into XenSource competition (despite past partnership status).

$32 million isn’t likely what he’ll net out of this, but that is one big number.

Jon C. Ogg
October 26, 2007

Jon Ogg is the editor of the 24/7 Wall St. Special Situation Investing Newsletter; he does not own securities in the companies he covers.

Here is the formal explanation from the company of a 10b5-1 plan: Rule10b5-1 allows officers and directors to adopt written, prearrangedstock trading plans when they do not have material, non-publicinformation. Once the plan is set up, trades may be executed at timeswhen the director or officer is in possession of material nonpublicinformation, based on the application of a formula or bindinginstructions determined at the time the plan was entered.