Citrix Systems Q4 2009 Earnings Call Transcript

123jump.com Staff
11 Feb, 2010
New York City

Revenues rose 8.4% to $451 million and net income rose 46.7% to $88 million or 47 cents per diluted share. Adjusted operating margin was up sequentially by over 3 percentage points to 28%. For the full year operating margin expanded by more than 110 basis points to 24% delivering on 2009 guidance.

Citrix Systems, Inc. ((CTXS))
Q4 2009 Earnings Call Transcript
January 27, 2010 4:45 p.m. ET

Executives

Eduardo Fleites - Senior Director, Investor Relations
David J. Henshall - Senior Vice President and Chief Financial Officer
Mark B. Templeton - President and Chief Executive Officer

Analysts

Abhey Lamba - ISI Group
Bhavan Suri - William Blair & Company
Stephanie Withers - Goldman Sachs
Daniel Ives - FBR Capital Markets & Co.
Bradley Whitt - Broadpoint AmTech
Joel Harmon - Robert W. Baird & Co., Inc.
Giuseppe Incitti - JPMorgan Chase
Munish Jain - Morgan Stanley
Curtis Shauger - Caris & Company
Dormain Geyer - Thomas Weisel Partners, LLC
Juben Matthew - Deutsche Bank Securities
Kirk Materne - Rafferty Capital Markets
Brent Williams - Benchmark Company
Mitesh Dhruv - Banc of America/Merrill Lynch
Katherine Egbert - Jefferies & Co.

Presentation

Operator

Good afternoon. My name is Alatza, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Citrix Systems Fourth Quarter 2009 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 session. If you would like to ask a question during that time, please press star then a number one on your telephone keypad. To withdraw your question, press the pound key.

Thank you. I would now like to introduce Mr. Eduardo Fleites, Senior Director of Investor Relations. Mr. Fleites, you may begin your conference.

Eduardo Fleites

Thank you, Alatza. Good afternoon, everyone. And thank you for joining us for today’s call where we will be discussing Citrix’s fourth quarter and fiscal year 2009 financial results. Participating in the call -- Mark Templeton, President and Chief Executive Officer; and David Henshall, Senior Vice President and Chief Financial Officer.

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 to review the financial results, I want to state that we have posted product classification and historical revenue trends related to our product groupings to the Investor Relations page of our website. I’d like to remind you that today’s conversation will include forward-looking statements made under the Safe Harbor provisions of the United States Securities laws.

These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Such as the impact of the global economic climate, uncertainty in the IT spending environment, risks associated with our products and competition. Obviously these risks could cause actual results to differ from those anticipated.

Additional information concerning these and other factors is highlighted in today’s press release and in the company’s filings with the SEC, including the risk factor disclosure contained in our most recent annual report on Form 10-K which is available from the SEC or the company’s Investor Relations website.

Furthermore, we will discuss various non-GAAP financial measures as defined by the SEC’s Reg G, a reconciliation of the differences between GAAP and non-GAAP financial measures discussed on today’s call can be found at the end of today’s press release and on the IR page of our website.

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

David J. Henshall

Thanks, Eduardo. And welcome to everyone joining us this afternoon. Today we announced our results for the fourth quarter and fiscal year 2009. As you can see from the release, we finished off the year with solid momentum, delivering over $1.6 billion in total revenue, $480 million in cash flow from operations and more than 100-basis point expansion in adjusted operating margin.

Entering the year, we were appropriately cautious given the economic recession and decline in IT spending. We made profitable growth a top priority and focused on tight execution.

Many of the transformations we made in 2009 have allowed us to build a more efficient infrastructure and drive long-term changes in our cost structure. All while material increase in investment in those areas we believe are strategically important going forward. I’m very pleased with our execution in the field, operationally and with our products organization during the quarter.

So looking at the fourth quarter, results included record revenue across all geographic regions and strong growth in our desktop solutions following the mid quarter release of XenDesktop 4.

Overall, revenue growth accelerated to 9% year-on-year for a total of $451 million and adjusted earnings per share were $0.66 up 39%. Note that the EPS growth reflects not only the strong operating performance but also the benefit of certain tax items that I will highlight later.

So drilling in to the individual line items for fourth quarter, revenue from new license sales was $168 million up 4% from last year and up 30% sequentially. License update revenue increased 6% from last year, a result of strong renewals for subscription advantage. Technical Services increased 20% led by support maintenance agreements and Online SaaS revenue was $82 million up 18%.

From a geographic perspective, the Americas region continued to execute well in fourth quarter with revenue up 7% from last year to $189 million, including a record number of $1 million plus deals.

Internationally, EMEA saw nice improve in the business environment leaving revenue up 3% from last year and up 27% sequentially to $143 million. Similar to the Americas EMEA also saw large rebound and large strategic transactions with customers. And finally, revenue in Japan in the Pacific region was up 21% from last year to $37 million, so overall really an excellent quarter.

Customer interest, pipeline build and visibility continue to move in the right direction. We are going to remain focused on delivering results while building momentum across our main product categories of desktop, data center and cloud and online collaboration.

So now I would like to discuss the fourth quarter results within these three areas. First, our desktop business, which includes both application and desktop virtualization solutions grew 5% over last year to over $290 million.

The results during the quarter were highlighted by the very positive customer response to our latest desktop virtualization product, XenDesktop 4. XD 4 contributed over $26 million in new license revenue during the period and $30 million overall.

In addition, the XenDesktop trade up program which allows existing XenApp customers a path to upgrade the licenses to the broader desktop solution far exceeded expectations. As a reminder the accounting for the trade-ups is largely ratable in nature, driving about $20 million of growth in deferred revenue.

Within the desktop category there is also a number of very encouraging metrics during fourth quarter including a sequential improvement in total license revenue of more than 30%, a record number of strategic $1 million plus license transactions, half of which included both desktop and app virtualization solutions.

We had five new XenDesktop deals of 10,000 seats or larger and the overall ASP’s trended up due to strong contribution from the platinum editions of both products, so good numbers really across the board.

And as we reviewed last quarter, we will continue to call out certain metrics for the standalone products within this category. But they are clearly becoming less relevant as customers begin to acquire the full desktop virtualization, which incorporates both of these capabilities.

So next I’d like to review the data center and cloud business, which consists primarily of our app networking and server virtualization solutions. Led by NetScaler, revenue from this area was up 18% year-on-year to $70 million. Overall, the NetScaler MPX and VPX product lines are gaining market share and setting the agenda for web app delivery controllers.

Our high-end highest performance products continue to be the gold standard for cloud and internet centric customers driving over 50% of fourth quarter revenue. And we saw record sales on the enterprise side, driven by feature-rich mid-range NetScaler’s including the brand new VPX Virtual Appliances with over 6,500 downloads and a very solid early ramp of VPX revenue.

The other key component in the business is XenServer, where we saw significant growth in downloads and expanding unit market share which Mark will drill down more in his comments.

So finally, touching on our Software as a Service business, SaaS revenue was up 18% in the quarter and 19% for the full year. The Online Services team continues to deliver solid results in this business that represents nearly 20% of total revenue for Citrix.

The growth year is being led by the collaboration products in the GoToMeeting family which grew more than 35% in fourth quarter. Our customers continue to be very focused on improving productivity while cutting costs and by leveraging our GoTo services they can immediately reduce travel budgets while expanding customer reach.

So turning to expenses and operations. In Q4, adjusted operating margin was up sequentially by over 3 percentage points, to 28%. For the full year, our op margin expanded by more than 110 basis points to 24%, delivering on our 2009 guidance. This is a result of improved revenue performance and our continued focus on execution.

Like I said before, our initiatives have been centered not only on cost structure changes but also on a broad reallocation of investments to materially increase focus on those areas of the business such as desktop, SaaS and others.

On the rest of the P&L, other income was down both sequentially and year-on-year as we’re realizing lower interest rates on our invested cash and our tax rate declined significantly in fourth quarter. The lower tax rate here was a function of various tax items that we have been working on throughout the year, the largest being an R&D tax credit project. So in total, these tax items contributed net benefit of about $23 million.

Looking at the balance sheet, cash and investments increased to over $1.2 billion, driven by a record $178 million in cash flow from operations. Primary use of cash in Q4 was again for stock repurchase, we bought back almost 2 million shares an average price of $38.50. And for the full year 2009 have repurchased just about 6.5 million shares in total.

Deferred revenue increased $63 million sequentially or about 11% to a total of $619 million. As I discussed in last quarter’s call we expect that both new sales of XenDesktop 4 and the XenDesktop trade-up program would generate a higher mix of deferred revenue than we’ve seen in prior quarters.

This is true in fourth quarter and when combined with the solid subscription advantage renewals really drove this record balance. It’s a good indicator of true XenDesktop performance and also of customer commitment as we look into 2010.

So finally I’d like to discuss our current outlook and expectations for Q1 and for the full year 2010. But before I review numbers let me provide a little context on how we are managing the operating model this year.

We’re executing on a business plan to continue to drive and expansion the leverage while strongly reinvesting in critical areas of the portfolio and our ability to service customers around the globe.

You know, we are pretty encouraged by the improving spending dynamics that we are seeing in most years, the high level of interest in desktop virtualization, our continued gains across app networking and SaaS and really as well as the trend towards larger strategic transactions.

So balancing this optimism against a global economic backdrop that is really still recovering, we currently expect that for the first quarter of 2010 total revenue to be in the range of $405 to $410 million, interest income of $3 to $4 million and adjusted EPS between $0.39 and $0.40.

For the full year 2010, we are raising our outlook and currently expect that total revenue will be in the range of $1.74 billion to $1.76 billion, adjusted operating margin will increase by 75 to 100 basis points as compared to 2009, interest income in a range of $16 to $19 million and adjusted EPS between $1.87 and $1.90 per share.

So now I’d like to turn it over to Mark to give you additional details on the quarter’s performance and discuss our going businesses. Mark?

Mark B. Templeton

Thank you, David. And welcome, everyone. Today we are reporting record breaking fourth quarter results and overall an excellent 2009 performance, especially when you consider the tenuous market conditions during the year.

A disciplined approach to financial and operational management along with strong execution allowed us to gain share in some of the industries most exciting markets. Our goals were to drive short-term and long-term improvement in our cost model, to strengthen our position in desktop virtualization, SaaS and cloud and to deliver growth in both revenue and profitability. I’m really proud of the entire Citrix team who worked tirelessly and accomplished all of this.

In addition, our thanks goes to thousands of Citrix customers and partners for their business, their trust and their enthusiasm for our vision. Virtualization wherever it’s used means lower cost, greater flexibility and new possibilities for IT.

Its transformed servers in the data center, it’s at the core of the cloud, it’s the underlying technology for web collaboration and next, it will transform the desktop, us in with it new virtual work styles for users and new on-demand ways to manage IT service delivery.

We are seeing it in the market. In fourth quarter pent up demand for desktop virtualization, a timely launch of XenDesktop 4 and uncommitted budget dollars really came together to give us some great tailwind. You can see it in our results and it shows in the strategic deal metrics.

For example, seven figure deals doubled in fourth quarter to 22. So we’re gaining good confidence in the strategic customer opportunities that lie ahead.

CIO’s are telling us two things. First, they want to simplify enterprise computing and second, that they are ready to embrace the new ideas of IT as an on-demand service. We think this is the promise and the opportunity of virtual computing infrastructure. As we look to 2010, our sites are on three things.

First, mainstreaming desktop virtualization by offering a revolutionary system for managing applications and desktops, secondly, broadening the reach of web collaboration by integrating a richer set of on screen media into the world’s fastest growing web collaboration suite and third, powering public and private clouds by delivering key networking and virtual infrastructure for the next generation data center that’s bridged to the cloud

So next I’d like to address each of these market opportunities. Our Q4 results indicate desktop virtualization is ready to go mainstream, adoption has begun, across all industry segments and customer sizes on a global basis. Market drivers include migrations to Windows 7, a growing use of Macs in the enterprise, the explosion of consumer devices and the growing needs to support a virtual work stop.

The net of this is that customers are rethinking their desktop strategy and virtualization is increasingly at the center of the picture. As a result, the launch of XenDesktop 4 in mid November really surpassed our expectations. We sold hundreds of thousands of new licenses with five deals exceeding 10,000 [CD] each.

We closed over 1,000 new customers and we saw more than 20,000 downloads of XenDesktop Evaluation System. It’s amazing performance in just six weeks of product availability. All told we exited the year with 10 customers with 10,000 or more virtual desktops in full production.

Customers are choosing XenDesktop 4 because it’s the only complete desktop virtualization product on the market, offering powerful differentiators like FlexCast, a new breakthrough technology that supports all the major virtual desktop models in one integrated solution, dramatically improving ROI and making desktop virtualization a practical reality for broad enterprise wide deployment.

The next difference is Citrix HDX, our market leading technology to enable a high-definition user experience. It won’t choke your local network and it’s capable of running over high latency connections like 3G wireless.

Additionally, there is XenApp for on-demand apps. It’s included in XenDesktop 4, giving customers a single desktop virtualization system where both apps and desktops are centrally managed.

All this gives XenDesktop customers the flexibility to deliver the desktop as a service simplifying desktop computing for the broadest ranges of users in three ways. First, with XenApp, much of the ROI of desktop virtualization comes from centralized apps and XenApp is the clear market leader. It continues to be a strong standalone product for app delivery projects, in fact there were six deals over a $1 million in fourth quarter.

At the same time it’s an integral part of XenDesktop Enterprise and Platinum which deliver a full desktop virtualization stack. XenDesktop Enterprise and Platinum support all the major virtual desktop models in a single integrated solution, going way beyond basic VDI. These additions run on XenServer, Hyper-V and ESX and deliver a full desktop virtualization stack.

Customers are choosing these powerful product additions which represented over 95% of XenDesktop licenses in fourth quarter with seven deals that were over a $1 million.

Finally, for customers where basic VDI fills a project need, we offer XenDesktop VDI addition. This solution competes head-to-head against a premier version of competitive products at a better price and we’re winning countless numbers of bake offs. We’re winning here because of Citrix HDX technologies.

In addition it’s the most open, powerful and flexible VDI solution on the market both XenServer and Microsoft Hyper-V are right in the box and it also runs on ESX and vSphere. So best-in-class products in each of these three areas gives us the largest market reach, customer choice and an optimal solution for every virtual desktop scenario.

Ahead there’s an innovative roadmap that includes XenClient, our client hypervisor technology which is in beta trials at over 50 marquee customers today. This project is moving ahead rapidly and will become yet another game changing opponent for virtualization at the desktop, so stay tuned. So virtual apps, virtual desktops, virtual client, we’re really setting the stage for the broadest range of desktop virtualization solutions.

Next I would like to move to our SaaS systems. Web collaboration and desktop support actually virtualize the location of people allowing them to reduce travel and work anywhere.

These SAAS delivered services are a key part of our strategy for virtualization of the desktop. We are really bullish on the $3 billion web collaboration market and I’m really pleased with our trajectory.

Our growth continues to be driven by increasing customer usage, moving web collaboration closer to becoming a mainstream tool for millions of people.

GoToMeeting sessions increased 30% and Webinars were up 82% in fourth quarter and GoToAssist for mode support sessions were up 23%. So overall, more than 25 million people experienced the virtual meeting or support session powered by Citrix online services resulting in broad exposure to our web-based collaboration tools.

GoToTraining, our newest collaboration service will launch this quarter, entering us in the fast growing virtual training market and leveraging our highly scalable collaboration platform. For the first time this market will have a simple powerful product that sold over the web directly to thousands of training professionals.

Looking into 2010, we have an exciting roadmap that will extend our geographic reach. That will enhance our collaboration services with support for richer onscreen media and we’ll begin to tap the enterprise collaboration market for the full sweep.

So, you can expect us to invest in these areas to drive additional share gains and to further solidify our position as one of the top five software as a server players in the industry.

Next I would like to discuss our data center products, where NetScaler and XenServer are bringing efficiency and flexibility to private and public clouds. Similar to the desktop and collaboration businesses our App Network and products delivered a great performance in fourth quarter.

Overall the NetScaler MPX and VPX product lines are gaining market share and setting the agenda for web app delivery controllers. The ADC market remains a two horse race and 2010 will be another year of great innovation and improvements in price performance. With growth coming from market expansion including much greater traction in EMEA and Asia, deeper penetration with cloud service providers and an increasing tax rate to growing desktop virtualization business.

Our other key component for power and private public cloud is Citrix XenServer. XenServer in our Essentials Management Products continue to gain share in the server virtualization market and they serve as a powerful platform under XenApp, XenDesktop and NetScaler VPX.

Downloads and activations of free XenServer and evaluations of essentials are running at record rates with over 20,000 production activations of XenServer in fourth quarter alone. XenServer is appealing to customer’s who are cost conscious, have mixed Windows/Linux environments, or who need the flexibility of a heterogeneous data center.

In 2009 we estimate XenServer captured over 10% of newly virtualized servers and it’s now in production in over 40,000 organizations worldwide with the largest organization now at almost 20,000 physical servers.

We are continuing to gain traction and we expect to further our presence in the broader data center through the recently launched XenCloud open source project. XenCloud leverages the high performance, bare metal power of the Xen hypervisor.

This open source project includes full support for Windows and Linux workloads, full live migration, VM life cycle management, storage integration, full power, virtual switching, OBF support and the XenAPI tool stack.

By taking a more open approach, cloud and enterprise customers using the XenCloud platform will enjoy easy interoperability between private clouds and public clouds, enjoying cloud service independence, all without locking them in to any particular vendor.

Going into 2010, XenServer and our XenCloud platform coupled with our NetScaler offering have us well positioned to provide a premier offering to cloud service providers as the market emerges.

Clearly we are at the threshold of a significant industry tipping point away from the distributed computing era and into the virtual computing era where the power of virtualization to simplify, to consumerize and commoditize will create new industry leaders that radically change the economics of computing from desktop to data center.

Some say it’s a revolution and others think of it as an evolution, either way Citrix is at the epicenter. We are helping customers get control of computing costs, flexibility and security and to give control to their users of their personal devices and work stop.

Apples iPod announcement is emblematic of the consumerization, connectivity and new operating environment leading this revolution, from multi-touch tablets to always-connected smart phone, from Wi-Fi to 3G to 4G. So in the end we love the explosion of form factors and connection options.

With Citrix virtual computing infrastructure every device becomes a secure enterprise end point. Because there is a Citrix receiver for the Google phone, Windows phone devices Android tablets, Windows 7 embedded devices, Chromium Smartbooks and the list goes on and on.

In fact, there’s already a Citrix receiver for Apple’s iPad. It will give you full access to enterprise documents, applications and desktops, no downloading and always secure. So, you build the infrastructure once and you connect any device over any network powered by Citrix virtual computing infrastructure.

We are starting 2010 with excellent financial, operational and strategic strength, benefiting from many transformations during 2009 that David talked about and giving us the platform to bring the power virtualization to meetings, to desktops, to networks and to servers with a full end-to-end platform.

A serious focus for 2010 is to increase our market visibility, customer reach and go-to-market effectiveness, so here is what to expect. First, a significant increase in brand awareness on a global basis. Secondly, investments to increase our sales and service capacity to drive larger, more strategic deals.

Third, programs that allow channel partners to upgrade their capabilities in desktop virtualization. Fourth, deeper and new system integrated partnerships an area where we are already seeing increasing success and notable pipeline build.

Next, increased product, customer and field sales engagement with our strategic partners, including Microsoft, HP, IBM and Dell and as always an amazing innovation agenda with major releases of every product with a few great surprises of course.

So in closing we’re witnessing an IT revolution, a time that will drive accelerating demand for virtual computing infrastructure. This is how we will continue to deliver long-term value to shareholders, for employees, for partners and for customers.

I’m really delighted to share these results with you and now let’s open it up for questions.

Question-and-Answer Session

Operator

Ladies and gentlemen, at this time, I would like to remind you, if you would like to ask a question, please press star then the number one on your telephone keypad. We’ll pause for just a moment to compile the Q&A roster.

Your first question comes from Abhey Lamba with ISI Group.

David J. Henshall

Abhey.

Abhey Lamba - ISI Group

This is Abhey.

David J. Henshall

Yeah. Hi.

Abhey Lamba - ISI Group

Hi. Can you hear me?

David J. Henshall

Sure can.

Abhey Lamba - ISI Group

Okay. Sorry about that. Yeah, I just wanted to know, the shift of the greater portion coming in on a ratable basis and going to the -- going to balance sheet. Is this a permanent shift in the revenue model or is it only through the transition and should we expect your business to revert back once this transition is over?

David J. Henshall

Sure, Abhey. It’s really two things that I would point you to. First, similar to our discussions over the last few quarters, you look at a brand new license sale and for looking backwards a customer buying XenApp, we’d defer somewhere about the 22% to 24% of each initial booking and put that on the balance sheet as deferred revenue recognizing it ratably over the service term.

For a new full desktop virtualization solution that number is a couple of points higher, so not really a material shift. The two other things that have impacted deferred revenue over the last few quarters are, A, large deals and especially multi-year deals where customers are looking to either lock-in support or annual licensing for a multi-year period of time.

Or, two, the trade-up program, so XenDesktop trade-up has deferral rates and just as a reminder, there is lots of different flavors of the trade-up program, depending on the version the customers on whether they are active or not on subscription, whether they are looking for a full upgrade or just a partial, so lots of different variables. But netting it all out those carry deferrals anywhere from about 45% to nearly 100%. So that’s really the two places that I would point you to.

I think overall it is a subtle transition that’s going on over a long period of time and it probably makes sense to look at the company also on a bookings basis in addition to recognize revenue going forward.

Abhey Lamba - ISI Group

Got you. Thanks. And Mark, can you talk about the competition in the desktop virtualization space. Who do you see most and what is making you win projects there?

Mark B. Templeton

Sure Abhey. Obviously, we see VMware mostly with their View product in the marketplace. Let’s face it they’ve been actually out in the virtual desktop space for a long time and stimulated a lot of customer interest.

Off of that interest when we get engaged, we talk with the customer really I think a lot more strategically about desktop virtualization and the full stack and so forth. And they realize that VDI, which is really what VMware has been able to offer so far, just by itself is limited in terms of its applicability.

And with XenDesktop 4, we actually have a system that provides all these different virtual desktop delivery methodologies, including apps on-demand and all of our very robust HDX technology.

So when you take user experience, optimizations in terms of being able to use these different types of virtual desktops and you look at the open architecture and then you put XenApp in the mix, we are winning virtually, we are winning all the strategic deals because customers that do a strategic virtual desktop virtualization project have all of these use cases where networks are thin and highly latent or they have a wide range of devices or they want to stream desktops to an endpoint. They want to use client virtualization, there are a lot of elements there when they take a look at that, we are the winning solution.

When we go head-to-head in VDI, we’re winning most of those and again, based on having a superior user experience as well as better utilization of network resources and equal or better virtual machine density.

So, there are a lot of competitive points but most of the time when we get a look at the deal, we’ve got a very, very high win rate. And you can tell that by the numbers we reported and you can certainly see that most of the business, 95% of the licensing was skewed towards the Enterprise and Platinum edition which actually have all the features that I mentioned.

Abhey Lamba - ISI Group

Thank you.

Operator

Your next question comes from the line of Bhavan Suri with William Blair.

Bhavan Suri - William Blair & Company

Yeah, guys. Good quarter.

David J. Henshall

Thank you.

Bhavan Suri - William Blair & Company

Just a couple of quick questions here, you mentioned that 50% of XenDesktop was Enterprise and Platinum. I’m so -- is it logical to think that the other 50% is potentially cannibalizing some of the XenApp base. So are folks from XenApp adding to the VDI version or the standard version of XenDesktop on top of their existing XenApp licenses?

David J. Henshall

Actually, Bhavan, let me make a correction, it’s actually more than 90%, actually 95% that’s coming from the Enterprise and Platinum edition and very little revenue is coming out of the VDI edition. There’s just not real high customer interest in a VDI only solution.

Bhavan Suri - William Blair & Company

Interesting. Okay. Thanks. And then, with the desktop virtualization market are you sort of piggy backing off of the previous question. Are you sort of replacing the VMware part primarily or is it a mix of greenfield or is it primarily greenfield?

Mark B. Templeton

Yeah. You know, it’s definitely a mix and as I said earlier, where customers have done a pilot with VMware’s product and sort of gotten the overall idea and the potential of VDI. Usually they end up with huge questions around the user experience and scaling on the network and huge questions around the economics.

In fact is with VDI alone, you don’t actually implement a VDI solution because of economics.

Bhavan Suri - William Blair & Company

Right.

Mark B. Templeton

You do it when security and speed trump the economics and there are some cases where that is true. And so off of that kind of interest customers contact us and we are able to talk with them about the bigger picture.

And so, yes, there are some replacements but I think for the most part a lot of the pilots are pilots where customers are still in consideration and we are getting more and more regular consideration in those deals.

Bhavan Suri - William Blair & Company

Great. And then one quick question on the SaaS business. You didn’t give update on the [Hi-Tech] and I was wondering how uptick was with the [Hi-Tech] business and sort of the crossover between the GoToMeeting users that were using [Hi-Tech].

David J. Henshall

Yeah. Overall, it’s good. I mean, we’re seeing good results across our [Hi-Tech] conference. I think as a standalone I’d say good, but probably more importantly on the integrated toll free especially with the broader collaboration of products, is where we are really seeing the attach rate, that is where I would expect to see a lot of the upside in the future.

Bhavan Suri - William Blair & Company

All right. Great. Thanks. Good quarter, guys.

David J. Henshall

Thank you.

Operator

Your next question comes from the line of Sarah Friar from Goldman Sachs.

Stephanie Withers - Goldman Sachs

Hey, guys. This Stephanie Withers on for Sarah. So looks likes it was a strong topline performance this quarter and we’re seeing signs from your peers around the industry that the environment is getting a bit better.

So could you maybe help us understand some of the assumptions going in to you full year guidance, I think maybe we -- given this solid performance we’re seeing in this quarter, we might have expected a bit of a step up there?

David J. Henshall

Sure. If you think about 2010, I mean, our position is we are executing against a backdrop of economic environment that’s still somewhat fragile. It’s improving and we saw better dynamics across all markets.

We did move our guidance up, so I’m sure most expectations will be moving up, that’s really just on the back of the strong traction we had in Q4 and our outlook from pipeline, pipeline coverage, deal opportunities, proof of concepts, all of those things that we look at give us the confidence to do that.

So it’s early in the year, we always take a fairly prudent approach to guidance and we’ll continue to update that as we move over the next couple of quarters.

Stephanie Withers - Goldman Sachs

Okay. And just a couple of more questions on that same topic. In terms of our assumptions geographically, are you assuming a bit more of the recovery in some of the markets that have been tougher like Europe?

David J. Henshall

Yeah. I think our expectation is that Europe continues to show slow but steady progress. We had a great fourth quarter in EMEA really across multiple industries in multiple countries. I’d really like to highlight the XenDesktop business where EMEA drove probably half of the desktop revenue and bookings through the period, including trade-up, so lots of activity.

The activity in the pipeline metrics have been strong all year. It’s really just been a case of budget availability. So I think as the majority of those organizations just had to see higher confidence in their own business, it will translate through a better spending pattern, so continuation of what we are seeing.

Stephanie Withers - Goldman Sachs

Okay. And just one last one on sales and marketing looking forward. What kind of assumptions do you have baked in terms of how much hiring you need to get behind the VDI opportunity?

David J. Henshall

I think from a hiring for VDI, specifically, I’d probably reframe that a little bit and because desktop virtualization is really in the power alley of a lot of our channel partners and existing go-to-market capacity.

I think about our investments over the next few quarters really along the line of some of the things that Mark pointed out. From a go-to-market capacity, it’s around increasing the relationships with systems integrators. It’s around increasing our consulting capability or capacity to ensure customer success.

I think we’ve got opportunities to expand coverage across all geographic regions because the demand is out there. So we’ll do that where it makes sense to just continue to support customers.

We’ve also been doing a similar to the other areas of the business, a pretty big resource reallocation inside the field organization to really improve productivity and enhance execution. So more of the same is really the way I would put it.

Stephanie Withers - Goldman Sachs

Okay. Great. Thanks.

David J. Henshall

Thank you.

Operator

Your next question comes from the line of Daniel Ives with FBR Capital.

Daniel Ives - FBR Capital Markets & Co.

Hi, Mark. This is Daniel. Just a follow up on EMEA, how it’s improved, I know you mentioned larger deals have been improved on that front. What about on the smaller deals, I believe that’s one area where you had issues in the past in terms of weakness. Has that improved as well or is this on a larger deal and on the larger deals, what’s really been the catalyst behind that as well?

David J. Henshall

Couple of things, on the small deal front, we generally refer to this as one rate business and that tends to be the smaller project, more tactical type transaction that comes largely through some of our channel partners. And that was weak in most areas throughout 2009 and largely a reflection of the broader economic conditions.

I think that as we have started to recover from the recessionary period and in markets outside the U.S., we’ve seen a general pick up in that business. Not huge growth rates yet but I expect that to be a trend that we see in 2010.

On the strategic front, we had good traction across large strategic business all year. I mean, the customers that are really looking at managing their infrastructure whether it’s around performance, security, cost, upgrades to new OS, et cetera, that’s been there.

And so even though we closed a record number of $1 million plus deals in Q4, we also increased or closed a lot of them in the first three quarters of the year. So I think what we are saying is that as conditions continue to improve, as desktop becomes much more mainstream, we will see all of these continue up into the right.

Daniel Ives - FBR Capital Markets & Co.

Got you. And then one final one. On the online services front, solid growth there. How do you see that growth rate going forward in ‘10, not to get too granular but if you can speak to that point overall?

David J. Henshall

Sure. I don’t want to get too granular as you mentioned on the 2010 guidance at this point in the year. But what I would say is that the expectation right now is -- it’s pretty optimistic around our SaaS business. Mark pointed out some of the new things that are coming on line in terms of our training products.

We are continuing to rollout international expansion although we have been doing it fairly slowly and [Hi-Tech] audio and audio integration is a new leg of growth for us. So even as the numbers get larger I would still expect growth in our SaaS business to be at least in mid-teens into 2008, excuse me, 2010.

Daniel Ives - FBR Capital Markets & Co.

Great. Thanks a lot.

Operator

Your next question comes from the line of Brad Whitt with Broadpoint Capital.

Bradley Whitt - Broadpoint AmTech

Hey, guys. Thanks for taking my questions. Just curious as to whether you think you saw much impact or demand generated from Windows 7 refresh during the quarter or is it still a little early for that?

Mark B. Templeton

Well, I think Windows 7 refresh, Brad, is one of the catalysts that’s driving desktop virtualization overall. And certainly due to the launch of Windows 7 and overall availability it was a huge driver of the strategic conversation with the customer around how do you get to Windows 7, efficiently and quickly.

And from those conversations, we get consideration for the full virtualization stack we offer. Because remember when you buy a license to XenDesktop for let’s say Platinum edition, you can take a physical PC that has Windows 7 on it sort of a refresh machine and basically put our end point software on it and deliver all your applications into it without installing them.

So it’s very quickly to get to a full Windows 7 implementation even when you refresh the end point and then of course, because Xendesktop also has all of the desktop delivery capabilities included with it, you can implement desktop streaming or hosted desktops or server hosted desktops. There are a number of models and they can all be configured around Windows 7 and you can do that even more quickly in many cases and extend the life cycle of some of the desktop hardware that you already have.

By having that sort of bigger conversation, that’s really catalyzed by Windows 7 where we are able to have that -- a broader ranging discussing with the customer. That’s what leads to a strategic transaction.

Bradley Whitt - Broadpoint AmTech

Okay. Great. That makes sense. And just a follow up on you mentioned that one of your initiatives for this year is to educate partners and launch programs with the partners. I’m just curious as to count on a scale of one to 10, how do you feel your partners are at this point at being able to sell XenDesktop 4 and to successfully implement that with your customers with 10 being where you want to be and kind of where are you -- one being the worst it could be, I guess?

Mark B. Templeton

So, first of all, couple of points. First, they are very capable kind of at the technical basic level already because there are so many concepts and technologies that XenDesktop shares with XenApp. So, they’ve got this sort of basic technical platform of knowledge in place.

But when you look at what channel partners do, they go where the money is and the money is where customer demand is and so what we’ll see -- what we saw in Q4 is a huge uptick in their activity with customers especially reengaging customers where they had a desktop virtualization project or need a pilot going and brought XenDesktop 4 in and could offer them a really great set of offers whether they were a greenfield customer, one licensed for the whole stack or an existing customer with XenApp licenses where think could actually preserve the value of XenApp and step-up and trade-up to XenDesktop 4.

And so we think there’ll be some growing momentum over the course of the year that we have to obviously step forth and do some training and education, et cetera, because we do have a lot of partners around the world to communicate the opportunity to.

And so I think that it starts with now demand and having them go to where the money is and we can show them and train them how to get it and how deals will be bigger, which makes them more productive, which makes them more profitable and that’s the way to a channel partners heart.

Bradley Whitt - Broadpoint AmTech

Makes sense. Thanks a lot for taking my question.

David J. Henshall

Thanks, Brad.

Operator

Your next question comes from the line of Steve Ashley with Robert W Baird.

Joel Harmon - Robert W. Baird & Co., Inc.

Yeah. This is actually [Joel Harmon] filling in for Steve. Thanks for taking my questions. In relation to the uptick in momentum that you are seeing in the larger more strategic transactions. How many enterprise relationship managers or ERM’s are on board at the end of the year and also how does that number compare to the number from a year ago and what are your plans for hiring ERM’s going forward?

David J. Henshall

Hey, Joel. This is David. I mean, I’ll answer that with like our total quota carrying headcount, which is over a thousand people in the sales and services organization and included in that are both ERMs, SEs, et cetera. And there’s in many cases where it really requires an account team.

So, I think increasing our capacity as we talked about earlier is one of those things that we are going to make a priority this year. We increased it during 2009. We will increase again in 2010. And do that in addition to expanding relationships with the big strategic partners and other ways to make sure that we are able to service customers and meet demand around the globe.

Joel Harmon - Robert W. Baird & Co., Inc.

Okay.

Mark B. Templeton

Joel, the only other thing is during 2009 we actually simplified the organization and took some overlays out. Which even on the same exact headcount made that headcount actually more skewed towards being able to touch a partner or touch a customer on more direct basis. So we had more quota carrying people actually out there with customers for the entire year.

Joel Harmon - Robert W. Baird & Co., Inc.

Okay. And with respect to XenServer, I’m hoping you can talk a little bit about the traction you’re seeing in converting free XenServer customers to paid XenServer Essentials customers? Thanks.

Mark B. Templeton

Yeah. I mean you can see in the numbers that the while the growth rates are really good and encouraging the activations are very strong, there are a lot of evaluations in place for Essentials. You know the conversion to licenses, paid licenses has been, it’s been slow and steady is the word.

The importance of XenServer to us is really of the underlying platform not only to offer customers a server virtualization solution but it’s the underlying platform to run and virtualize XenApp, underlying XenDesktop and that full stack and it’s underlying NetScaler VPX.

And we also leverage a lot of the technology there in the XenClient project that you’ll see more of later this quarter and in this year. So that’s how we think about XenServer. It’s one of a platform to drive and where we monetize it across Essentials, XenDesktop, XenApp and NetScaler VPX.

Joel Harmon - Robert W. Baird & Co., Inc.

Okay. Great. Thank you, guys.

Operator

Your next question comes from John DiFucci with JPMorgan.

Giuseppe Incitti - JPMorgan Chase

Hi, guys. This is Giuseppe Incitti on for John. Quick question just regarding promotions in the quarter and the impact relative to past quarters and also, just wondering how we should think about XenDesktop sequentially going forward? Thanks.

David J. Henshall

Sure. As far as promotions, there’s really nothing unique in Q4. We always have some level of promotion going on just around a project or geo or channel but nothing terribly unique in Q4, except the trade-up program, we’ve talked about a few times which is different than a promotion, more of a program approach.

As far as the test ops are concerned, embedded in our guidance, while we are not guiding on a product-by-product basis. I think it’s safe to assume that the broader desktop license will increase by mid to high- single digits on a year-over-year basis.

Giuseppe Incitti - JPMorgan Chase

Great. Thanks, guys.

Operator

Your next question comes from the line of Adam Holt from Morgan Stanley.

Munish Jain - Morgan Stanley

Thanks for taking my question. This Munish Jain for Adam Holt. I have a question, just wanted some color on the trade-up promo you said you saw some good activity. Could you talk little bit more about it and also if there was any impact on the XenApp Platinum?

David J. Henshall

Sure. Yeah. Overall, I mean, as we’ve said in our prepared remarks, we are extremely happy with the trade-up program, exceeding our internal expectations by a pretty wide margin and generating a lot of buzz with customers.

I mean, a couple of metrics that I would point out that are pretty interesting is, when we look at the trade-up if it was a customer that was looking to renew an existing XenApp subscription in the quarter, the resulting trade-up ended up being two, three even four times larger than that renewal might have been. So a customer is looking at this now as a much broader, more strategic solution than simply how they were deploying XenApp historically.

In total we traded-up hundreds of thousands of licenses of XenApp. We’re getting really good early traction with our install base and if you look across the broader opportunity we have about 15 -- as many as 15 million licenses out there that are active on subscription. That’s really the hard target base that we are going after.

And then on a secondary level, 10 million or so that have lapsed on subscription that this program gives our partners and our field teams a great opportunity to go back and reengage with them talking about a much broader desktop opportunity. So overall, just really happy with the numbers and encouraged as we look at 2010.

Mark B. Templeton

Yeah. The one thing I would add that I think is important is that we didn’t really see customers buying XenDesktop whether from scratch or trade-up unless they had done some sort of a pilot. So that’s why when we think about this and when you think about it, this is really pent up demand for desktop virtualization where there was already a strategy and experience. So this wasn’t kind of a convenient program to monetize existing licenses because there was no, I mean, the program is still in place today.

And at this point we, it will time out at the end of Q2 but there is no artificial sort of reason for a customer to buy the trade-up program. So those that bought trade-up had active pilots or in our pipeline, some of them were upside opportunities and those customers that were able to find uncommitted IT budget dollars, we think that we actually increased our wallet share in the quarter by getting some of the loose dollars that were available at the end of the quarter.

Munish Jain - Morgan Stanley

Okay. Thanks. I just have a follow up. I don’t know if you gave the XenApp Platinum as a percentage, what it was in the last quarter?

David J. Henshall

It was over 40% of the XenApp license mix.

Munish Jain - Morgan Stanley

And then going forward how should we think about XenApp because of your new license scheme with the customers, you think it might cannibalize XenApp licenses and people might go for more XenDesktop named licenses?

David J. Henshall

Well, I think, it’s really important to understand how customers utilize the different solutions. And in fact that the way we think about it internally is in the broader category of the desktop and that’s because it depends on what customers are looking to drive. Customers that have a project-by-project basis, tend to be more XenApp focused maybe high hike in currency and XenApp is where we sell a CCU license.

But if a customer is really looking to manage their desktop infrastructure and have the flexibility to not only provide a virtual desktop but also virtual applications to really maximize their flexibility, user experience, economics, et cetera. They’re going to gravitate towards XenDesktop and I think that’s what we are seeing now. So you really shouldn’t think about it as a cannibalizing XenApp but really think about these together as a broader desktop solution.

Munish Jain - Morgan Stanley

Okay. Thank you.

Operator

Your next question comes from the line of Curtis Shauger, Caris & Company.

Curtis Shauger - Caris & Company

Good afternoon, everyone. Thank you for taking my call.

David J. Henshall

Hi, Curtis.

Curtis Shauger - Caris & Company

Real quick question, Dave. When you book a large VDI deal, for a multi-thousand seats. Is that could you give us an idea of how the rev rec goes, I mean, is it just what you can get into place and install in the current quarter and then the rest has to be placed on like an off balance sheet deferral?

David J. Henshall

Couple of things. First, we didn’t book any large VDI deals. We did book, however, a whole bunch of large desktop virtualization deals and there is a difference, I think it’s important to keep coming back to it.

But as far as a normal transaction is concerned it really depends on how the deal is struck. At the simplest level, say a customer buys a thousand XenDesktop licenses. We’ll probably recognize on average 70% of that up front and will defer 30% of it as a subscription recognized over a year. Very similar to the way somebody deploys XenApp today.

On a more business basis, what we have been seeing in the desktop is that customers that come back from an initial purchase, the rebuy if you will is about 5x, the size of the initial purchase. So this is really a story about penetration as much as anything else. So the initial transactions may be a proof of concept, 100, 200 seats and then we’ll sell as the customer is deploying downstream.

Curtis Shauger - Caris & Company

That’s my question I guess, it, more directly, say you have customer that has a very large deployment. There is no way they are going to deploy all of it in the current quarter and yet you know contractually that they are going to overtime. Does that give you any more comfort now about your future backlog than it would have in previous points in time in history with just XenApp alone?

David J. Henshall

Well, let me just talk a little bit about what you said, contractually, I mean, usually what will happen is a customer will be looking at their infrastructure. And they may communicate to us they have 50,000 desktops that they plan on virtualizing over a period of time. And they choose to purchase 5,000 up front and that will take them X period of time to implement.

And so we will bill and recognize that 5,000 up front and then simply as the remaining POs are submitted is when we will book and recognize those transactions. There is no concept of off balance sheet backlog everything that we book is either recognized revenue or deferred revenue.

Curtis Shauger - Caris & Company

Maybe but I guess as people look to standardize maybe is a better way of putting it as opposed to using XenApp as a remote access tool. I mean, does it give you anymore comfort that you know there is potentially a bigger pool of seats to come any given quarter as you sign some of the larger XenDesktop deals?

David J. Henshall

Sure. I think it absolutely gives the sales teams much more visibility into a customer and what their long-term potential is and again this is about penetration of the available opportunity inside that account.

And if we know the stage of their deployment call it a smaller desktop virtualization initiative, we’ll certainly understand how that’s going how it translates in to a larger opportunity overtime and really gives the team something to work with. So, yeah, I’d say higher visibility into the pipeline and certainly one of the things that we track going forward.

Curtis Shauger - Caris & Company

Okay.

Mark B. Templeton

Main thing I would add is that we don’t really have a set of policies or contracts that encourage customers to buy shelf ware, I think that’s the question you are getting at. And so if they make a decision that sort of wall-to-wall this is a standard piece of infrastructure, they may have an intention to get it out there and get it out there quickly and then they can buy everything on day one, but if they have a rolling project schedule where they are going to take this on by one division, another division, another division. Then we have agreements that allow them to actually do that so maybe their commitment as David said might be 50,000 licenses but they may start with the first 5,000.

So for us, our policies around licensing and contracts have not changed and we’ve never made it interesting or encourage customers to buy shelf ware because we just think that’s bad policy overall. And I think there are a number of examples in software history where companies that did that are no longer with us and so and we think it’s very customer-centric as well.

Curtis Shauger - Caris & Company

Okay.

Mark B. Templeton

That’s why we are not worried about that trend because if you remember with the XenApp platform, we on average have only penetrated about 15% of the users in any given Enterprise. And so when a customer says I’m going to step up to full desktop virtualization and I’m going to go with XenDesktop, the likelihood of a penetration rate being higher than 15%, 30%, 40% 50% or 100% is great, okay. That’s why we are not too worried about it because we have 15 million active licenses to make this value proposition offer to that probably would translate into 50 or 60 million people, all right. So it’s not an issue for us.

Curtis Shauger - Caris & Company

That’s helpful. And one last question, I will turn the line over. You introduced a service provider license in the last year. Can you give us any perspective on what percentage of the business it may be, has it reached a material level or not and if it hasn’t, do you think it might within 2010?

Mark B. Templeton

It’s actually getting more traction than we expected, it’s still the numbers are still small and they are not material enough to breakout. We have over 300 [cloud] agreements in place and almost all of them are exercising either XenApp or NetScaler VPX.

XenDesktop has yet to get there because there are still licensing complexities with Microsoft that we are hoping Microsoft will make a lot easier so that Windows 7 VECD licenses can go to a [cloud] model. So most of the traction that we have seen is where service providers have used XenApp or VPX in their cloud infrastructure to offer hosted apps or to, or web app infrastructure.

Curtis Shauger - Caris & Company

Great. Thank you.

Mark B. Templeton

Thank you.

Operator

Your next question comes from the line of Tim Klasell with Thomas Weisel Partners.

Dormain Geyer - Thomas Weisel Partners, LLC

Hi. This is Dormain Geyer for Tim Klasell. Just wanted to see about the any progress in the deployment rates, I know in the last couple of quarters we’ve seen it go from maybe 1000 seats per quarter at a given customer to 2,000. Does that continue to creep up and then I have a follow-up question.

Mark B. Templeton

Sure, Dormain. On the first part of the question. I think two quarters ago we called out top 10 transactions were all over a 1000 seats in the desktop business. Q3 they were all over 2000, in fact they were all over 3000 in Q4 with five or six transactions that were over 10,000.

So we are definitely seeing customers engaging in much more, let’s call it higher scale of deployments. And we got a number of customers that have those active deployed and working well in their infrastructure. So the trend is moving very sharply at this point in time.

Dormain Geyer - Thomas Weisel Partners, LLC

Okay. Then my follow-up question is just on the XenClient launch which sounds like it’s coming out later this quarter. Is that something that customers are sort of factoring into their purchase decisions now or do you think that there is going to be potential for some freeze up when that comes out that people need to evaluate or could it potentially accelerate purchasing further?

Mark B. Templeton

No. I don’t think customers are really strongly considering XenClient, I mean, visibility and availability to customers has been pretty limited and we haven’t made any decisions or announcements about how we will package or price it.

So I think right now customers are looking at the value of XenDesktop really around sort of the delivery models that are in place, the on-demands apps capability, et cetera, making their decision that way, that’s where the deployments are.

In the future we think that obviously XenClient is a technology enabler to further possibilities in desktop virtualization overall and we’ll -- when we get to that part we will certainly tell you what we think about what it should do to demand and so forth.

Dormain Geyer - Thomas Weisel Partners, LLC

Okay. Thanks. And congrats on the quarter.

Mark B. Templeton

Thank you.

Operator

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

Juben Matthew - Deutsche Bank Securities

Hi. This is actually [Juben Matthew] for Todd Raker. When you talk about enterprise spending on desktop virtualization. Are you seeing an increase in shift of order dollars or are you seeing a shift away from spend on the desktop that they plan to do? Thanks.

Mark B. Templeton

Okay. You know, the connection wasn’t great but I think I understood your question. Honestly it’s hard to know where the -- exactly where the wallet is that is funding desktop virtualization overall. I think clearly the desktop refresh budget is got to be the primary one because it’s the primary driver of catalyst of the conversation with the customer. So I think that’s the sort of the primary wallet that we are seeing the budget come from.

I think secondly, I think, IT is looking at how do we get more leverage on our staff and either cost avoidance on hiring, et cetera or the bill reductions or maybe other reductions and so desktop virtualization infrastructure actually has a, brings a lot of leverage to application and desktop app can cut it in half, which means any given admin can support many, many, many orders of magnitude more end points than usual, so some of that budget will come from the people budget.

So I think those are the two primary ones and then a lot of the smaller transactions continue to be customers that are putting their toe in the water doing projects and they’ve identified desktop virtualization as a technology that they want to get some experience with.

I think in that regard we will probably see those budget line items actually increase dramatically in 2010 especially as customers sort of make the association between server virtualization and the great benefits they got from server virtualization. And why can’t I get some great economic, flexibility, agility benefits from desktop virtualization and we see more and more customers sort of making that connection and that’s a wallet we think will get funded more so this year because of that.

Juben Matthew - Deutsche Bank Securities

Okay. And second what’s your outlook for ongoing stock buybacks? Do you see them as the economy levels or plan on increase? Thanks.

David J. Henshall

Sure. We’ve been pretty consistent in the share repurchase program, spending in dollar terms about $75 million a quarter. I think it’s a good level to expect going into 2010. We’re always looking at the cash balance and trying to determine if there is a better use of cash and usually that means stepping up the share repurchase program. But I think that $75 million is a pretty good baseline for right now.

Operator

Your next question comes from Kirk Materne with Rafferty Capital.

Kirk Materne - Rafferty Capital Markets

Hi, guys. Thanks very much for taking the call. Mark, could you just talk conceptually about where in the, I guess, in customer pool is there really a cut off point where going to a desktop virtualization system doesn’t make sense based on the number of PC’s at a company?

Maybe it goes for everybody but when we talk to people it seems that the customers right now very large implementations obviously see the value immediately where some of the mid-sized customers have to do a little more work around it. I wonder if there is a rule of thumb, I was curious on your thoughts?

Mark B. Templeton

Not honestly, Kirk. It’s not in the Citrix world because remember when you buy that desktop virtualization that Platinum license, you buy it on a user or device basis and you can then use any and all parts of the stack. So where you have an end point that is a physical laptop, new laptop, you can use that license to simply drive apps there using sort of the classic XenApp, apps on-demand model where apps can be hosted or streamed to that end point and not installed.

So, if you think about just that, there hasn’t been any real threshold to the size company, I mean, clearly we focused ourselves on the business that typically is going to have 1000 employees or 500 PC’s or more, historically. But other than that I don’t think there is