Citrix Systems Annual Report 2008

FY2008 Annual Report · Citrix Systems
Loading PDF…
Annual   Report 200 8

Financial Highlights

Year ended December 31,

(In thousands, except per share data) 

2008  

2007  

2006  

2005

Net revenues 

$ 1,583,354

$ 1,391,942

$ 1,134,319

 $ 908,722

Cost of net revenues: 
  Cost of product revenues
     Cost of services revenues
     Amortization of product related intangible assets
Total cost of net revenues

47,801
79,303
48,028
175,132

42,984
65,027
29,596
137,607

32,911
46,585
19,202
98,698

14,404
26,929
16,766
58,099

Gross margin

1,408,222

1,254,335

1,035,621

850,623

Operating expenses
     Research and development

Sales, marketing and services
General and administrative
Amortization of other intangible assets
     In-process research and development
Total operating expenses

288,109
669,569
256,679
22,724
1,140
1,238,221

205,103
590,409
229,229
17,387
9,800
1,051,928

155,331
480,343
178,669
16,934
1,000
832,277

108,751
394,153
125,425
11,622
7,000
646,951

Income from operations

170,001

202,407

203,344

203,672

Other income, net

26,922

48,501

39,737

20,682

Income before income taxes

196,923

250,908

243,081

224,354

Income taxes

Net income

18,647

36,425

60,084

58,745

$    178,276

$    214,483

$    182,997

  $ 165,609

Earnings per share - diluted

$          0.96

$          1.14

$          0.97

$       0.93

Weighted average shares outstanding - diluted

186,682

187,380

187,725

177,771

Revenue
(millions)

$1,583

$1,392

$1,134

Earnings Per Share

Operating Cash Flow
(millions)

$1.14

$0.97

$0.96

$462

$422

$327

2006    2007 2008

2006    2007

2008

2006    2007

2008

 
Mark Templeton
President and CEO

Fellow Stockholders,

Our business performance for 2008 is a tale of two environments. We started strong, growing 
revenue 20% in the ﬁ rst half of the year in spite of a weak US economy. As the ﬁ nancial crisis 
spread globally, there was further weakening in IT spending, slowing our second half growth 
to 9%. In July, we took early, decisive actions to introduce new cost efﬁ ciency programs. These 
measures allowed us to achieve many of our proﬁ tability objectives in 2008, in spite of the external 
environment—a true testimony to teamwork and responsiveness across the company.

At the same time, we continued to invest in the most strategic areas of the business—especially in 
the virtualization and software-as-a-service (SaaS) markets we serve. Entering 2008, we had a lot 
of momentum from a strong 2007 performance. We also entered the year with an aggressive game 
plan: to transform IT into an on-demand service by centralizing the delivery of applications and 
desktops; to build on our strong web collaboration franchise; and to help customers transform 
static datacenters into dynamic “delivery centers.” This drove many signiﬁ cant accomplishments 
in 2008, accelerating both our product muscle and go-to-market strength.

In 2008, revenue was up 14% to $1.6 billion and non-GAAP earnings per share increased 2% to 
$1.63—which includes the impact of the strategic and substantial investment we made entering new 
virtual infrastructure markets. License revenue growth, dampened by economic headwinds, grew 8% 
over 2007. Our other revenue lines—including our Online Services business, License Updates, and 
Technical Services grew 22%, 15%, and 24% respectively.

Due to our continuing focus on operational efﬁ ciencies, our non-GAAP operating margin was 23% 
for the year, and a stronger 26% in the fourth quarter. Later, in the annual report section, you can 
ﬁ nd a full reconciliation between our non-GAAP and our GAAP performance. Our balance sheet 
remains solid, ending the year with over $850 million in cash and investments. Cash ﬂ ow from 
operations was a record $462 million, giving us the ﬂ exibility to repurchase almost 11 million, or 
6%, of our outstanding shares.

I’m pleased with our ﬁ nancial performance for 2008—especially when put in the light of the 
weakening global economy over the course of the year.

Annual Report 2008 • Citrix Systems, Inc. 1

The Outlook
2009 will present a new set of business challenges for every global technology company, including 
Citrix. Clearly, we are operating in a very dynamic environment. 

Five years ago, as we planned for the future, we anticipated this kind of world and what it would 
mean for our customers. We predicted a conﬂ uence of tectonic forces—globalization, disruption, 
regulation, consolidation and workforce evolution—resulting in unprecedented business change. 
Today, a global recession and tumultuous ﬁ nancial markets—factors we didn’t envision—are 
amplifying these dynamics for individuals, businesses and nations. Business agility and efﬁ ciency
—exactly what our infrastructure products and services are designed to deliver—are now critical 
to survival.

The cover of our 2006 Annual Report said “Over the next decade, delivering applications to people
—wherever they work and play—will become a deﬁ ning issue for IT. Why? Because applications are 
the language of business. Winners will be ﬂ uent with application delivery. Others will lag behind, 
struggling with the pace of change in an increasingly dynamic world.”

This is how the evolution of IT is playing out.

Citrix has always been comfortable as an outlier—owing our growth to the relentless pursuit of 
simpler, lower cost forms of enterprise computing. Our timing couldn’t be more fortunate or better. 
The Citrix way is to question generally accepted computing assumptions, and to innovate forward.

Traditional enterprise computing is collapsing under the weight of its own complexity. As never 
before, we see the inertia of traditional IT thinking being tested by new business realities. The need 
for dramatically simpler, more cost effective solutions will only intensify. Our long-held belief in the 
power of simplicity becomes more market-relevant every day.

Citrix has the datacenter products and online services to centralize, virtualize and minimize the 
complexity of traditional computing—signiﬁ cantly reducing costs, improving information security, 
mobilizing people, and delivering newly found enterprise agility. This is exactly what customers 
need—today and looking forward—to respond to the volatility of a dynamic world.

2

Annual Report 2008 • Citrix Systems, Inc. 

2008 Business Performance
As we began 2008, our strategic and operating plans were ambitious and aggressive. They always are. 
Top priorities were: 

• to signiﬁ cantly up-level our visibility as a strategic industry player,
• to strengthen our position in Windows and Web application delivery,
• to enter new markets for desktop and server virtualization,
• to expand our footprint in web-based collaboration, and
• to improve operating efﬁ ciency

I am proud of our 2008 accomplishments—with all the credit going to the most innovative, energetic, 
and passionate Citrix team I’ve ever had the privilege of leading.

Desktop and Application Virtualization
XenApp is our ﬂ agship product line in use by an estimated 100 million people every day. Leveraging 
the enhancements in Windows Server 2008, we believe last year’s introduction of XenApp version 5 
provides the industry’s most cost effective solution for delivering applications to physical and virtual 
desktops. Across our product lines, XenApp was the most impacted by the macro-environment, 
with revenue increasing 3% for the year. In the ﬁ rst half, solid demand for the XenApp Platinum 
edition increased deal sizes and transaction rates. Late in the year, customers became more hesitant 
to make large capital commitments and either delayed or reduced planned projects. We saw this 
especially among retailing, manufacturing and ﬁ nancial services customer segments. Renewal rates 
for license updates continued at a healthy pace in the mid-80% range, reﬂ ecting the strategic value 
of XenApp and positive future commitment.

For delivering Windows desktops as an IT service, we introduced XenDesktop—a ground breaking 
desktop delivery solution—entering us in to the desktop virtualization market. This exciting new 
product allows Windows desktops to be centralized in the datacenter and delivered as an on-demand 
service to workers anywhere. Analysts predict that the desktop virtualization market will grow from 
less than $100 million in 2008 to almost $2.0 billion by 2013, driven by adoption in the enterprise. 
Introduced in May, XenDesktop got off to a fast start, receiving much industry fanfare and customer 
accolades. We also established go-to-market agreements with Dell, HP, CSC and other global systems 
integrators to build out desktop virtualization practices around this exciting new product.

Working together, XenApp and XenDesktop, provide the best TCO, security and performance when 
it comes to delivering a fully virtual Windows-based workplace. We will stay aggressive in these 
markets by leveraging our broad virtualization technology platform, go-to-market partnerships and 
very large customer base to stay out in front, with Citrix as a market leader.

Annual Report 2008 • Citrix Systems, Inc. 3

Application Networking and Server Virtualization
Datacenter consolidation and optimization are powerful forces driving our Application Networking 
and Server Virtualization businesses. These products offer the cost reduction, performance improvement, 
enhanced security and overall ﬂ exibility needed to transform datacenters.

Last year, our Application Networking business, including NetScaler, Access Gateway and Branch 
Repeater, grew 24%, to over $190 million in revenue. These products accelerate and secure web-
based and branch ofﬁ ce applications. In 2008, we grew the NetScaler share in the enterprise segment. 
In fact, over the last two years, we tripled our base of enterprise customers with excellent results in 
the ﬁ nance, healthcare, education, government, hi-tech and manufacturing segments. This helped to 
offset slower purchases by our internet-centric customers, whose businesses were impacted by 
weaker e-commerce and web trafﬁ c growth.

We achieved a strategic milestone, launching NetScaler MPX as our most powerful line of web 
application delivery appliances. MPX features a massively parallel hardware architecture that 
leverages all the latest advances in Intel multi-core technology to deliver unmatched scalability and 
extensibility. It puts Citrix in a strong position to capitalize on the rapid growth in web applications
—including Web 2.0. 

Server Virtualization is a large and fast-growing market at the center of datacenter transformation. 
We’re attacking this opportunity in two ways: First, by offering a complete server virtualization 
solution focused on mixed Windows/Linux datacenters, and second, by offering a value-added 
product that complements Microsoft’s Hyper-V system in the broad enterprise space. 

Today, over 75% of the world’s servers are still not virtualized according to market analysts. There’s 
tremendous “white space” for affordable, powerful, virtualization solutions. Our Xen “engine” 
is proven. The scalability, economics and manageability of open source Xen have established it as 
the hypervisor-of-choice for “cloud service providers”—including the world’s largest virtualization 
deployment, Amazon’s Elastic Computing Cloud (EC2).

We entered this market with Citrix XenServer, conﬁ dent in its next-generation architecture and 
unprecedented reliability, openness and ease-of-use. Throughout 2008, we’ve been on a fast 
development track, launching version 4.1 early in the year, and version 5 late in the year. XenServer 
5 has gained market momentum and is getting excellent reviews from customers, partners and head-
to-head lab reviewers.

We’ve had some high-proﬁ le customer wins. Tesco, the largest supermarket chain in the UK, is 
virtualizing 1,500 physical servers for mission critical computing. SAP, which already uses 
Citrix XenApp to deliver their own SAP apps to more than 50,000 end users, selected XenServer 
to virtualize 500 servers by the middle of 2009. In fact, over 5,000 customers have already put 
XenServer to work.

4

Annual Report 2008 • Citrix Systems, Inc. 

To accelerate our penetration of this market, we recently introduced a new product line called 
Citrix Essentials for XenServer. This product line adds advanced virtualization management to the 
two virtualization platforms we expect to be the fastest growing going forward—Citrix XenServer 
and Microsoft Hyper-V. Hyper-V is now a built-in feature of Windows Server making it an attractive 
option for Windows-oriented environments. XenServer is ideal for customers with mixed Windows/
Linux environments and high-performance requirements. 

To drive even faster adoption, we’ve also released a powerful new version of XenServer that’s 
completely free. This radically changes the economics for millions of servers that are not yet virtualized, 
and makes it easy for customers to upgrade to the more advanced management features in Citrix 
Essentials when they’re ready. As a result, customers can now economically leverage virtualization 
infrastructure from both Citrix and Microsoft across every server in the datacenter. Our go forward 
roadmap gets even more exciting from here.

I like our position and we’ll remain aggressive in datacenter transformation.

Collaboration and Online Services
Capital spending constraints are driving a lot more interest in SaaS. Volatile fuel costs and very tight 
travel budgets are increasing the need for “virtual meetings” and “work-from-home” solutions. 
The web is rapidly emerging as the platform for low-cost, highly productive communications and 
collaboration. We’re leveraging these powerful market dynamics with GoToMeeting, GoToWebinar, 
GoToAssist and GoToMyPC.

The scale-out investments we’ve made in our online virtualization platform continue to pay off. 
Our Online Services business delivered 22% growth, reporting $260 million in revenue for the year. 
Demand across customers of all sizes strengthened our position as a ‘top ﬁ ve’ software-as-a-service 
vendor. Remote access and support services grew 9%, led by GoToMyPC which continues as the 
market leader. Citrix GoToMeeting was one of the fastest growing web services in the world with 
revenue growth of 54%.

Last year, GoToMeeting became the ﬁ rst online collaboration platform to seamlessly integrate 
telephone and VoIP communications for both Windows and Macintosh users. Now workgroups 
with a Mac or a PC can collaborate over the web with fully integrated audio from anywhere. 
Additionally, over 100,000 people took advantage of the beta test of GoToAssist Express—the 
newest member of the GoToAssist product family. These products dramatically reduce support 
costs and reduce travel for busy IT professionals and small businesses.

We believe voice services are a strategic part of web conferencing and collaboration. Last year, we 
acquired an innovative company with technologies that will allow us to offer a number of very 
cost-effective conferencing services to small-to-mid size businesses. Citrix HiDef conferencing offers 
a new level of sound quality and low cost in a very easy-to-use package, as a stand-alone service or 

Annual Report 2008 • Citrix Systems, Inc. 5

cross-sold with GoToMeeting. We’re committed to delivering innovative, affordable and easy-to-use 
web-based services to help our Online Services customers raise their ability to compete, reach new 
markets, and grow their business.

Business Leverage through Partnership
Industry and go-to-market partnerships are core to our business strategy. Our long-time partnership 
with Microsoft is the best example—now extending from datacenter to desktop as partners in 
virtualization. We offer robust virtualization infrastructure built on innovative, core products from 
both Microsoft and Citrix. The partnership works. In 2008, we were honored for the third time in 
ﬁ ve years as Microsoft’s Global Infrastructure ISV partner of the year. In addition, we were also 
awarded their annual Citizenship Award for the work we are doing with the Koﬁ  Annan Information 
and Communications Technology Center in rural Africa. Working with Microsoft continues to expand 
our brand, customer and channel reach, worldwide.

We also signiﬁ cantly expanded many other industry partnerships in 2008, signing new agreements 
with CSC, Dell and HP. These relationships give us a competitive edge, access to global accounts, 
and the ability to accelerate our overall position in the marketplace.

For example, early in 2009 we unveiled the ﬁ rst client-side ‘bare metal’ hypervisor technology, 
developed in collaboration with Intel. This partnership will result in a new Xen-based hypervisor 
that runs directly on a user’s PC or laptop, allowing both personal and business desktops to run 
securely and independently. One industry analyst said it could lead to a “redeﬁ nition of the 
relationship between PC hardware and software.” Another called it “one of the most signiﬁ cant 
announcements Citrix has ever made.” We agree.

This is indicative of the dramatic increase in the market spotlight on Citrix, giving our brand 
and products much more visibility to customers. We have enviable positions in some of the most 
strategic software markets including virtualization, SaaS, cloud computing and Web 2.0. More 
importantly, we are combining these technologies into a compelling end-to-end solution that has 
the potential to radically change the economics of computing.

Growing markets. Innovative products. Strategic partnerships. Customer value. These are the 
ingredients for growth.

To the Future
Tight IT budgets are not a short term trend, they are the new reality. The distributed computing 
model is aging rapidly, exposing its complexity, cost, and inﬂ exibility. It’s also quite clear that 
customers will be driven, even more rapidly, to centralize complexity in the datacenter, and 
distribute pure simplicity to the desktop. There’s tremendous potential for a true tipping point.

6

Annual Report 2008 • Citrix Systems, Inc. 

Centralization, optimization and virtualization have been the focus of Citrix product innovation, 
strategic acquisitions, go-to-market partnerships, and talent development over the past twenty 
years. It’s why we remain enthusiastically committed to our vision. Citrix Delivery Center, a single, 
unifying family of our enterprise IT products, allows inﬂ exible, static datacenters to become dynamic, 
responsive delivery centers. Citrix Online services leverage the power of the web to enable 
boundary-less collaboration, communication and support. With last year’s introduction of the 
Citrix Cloud Center, we are able to address the early trends for hosting, managing and delivering 
cloud-based computing services with an integrated portfolio of Citrix infrastructure products.

The fact is, web and cloud economics are amazing:

• Amazon sells capacity on their S3 storage service for a fraction of the typical enterprise cost
• Google runs thousands of servers with one administrator while today’s enterprise average is 
  less than 50 servers per administrator, and
• YouTube’s bandwidth costs are dramatically lower than those of the typical enterprise

Our goal is to empower our customers with the operating cost structure and agility of the web. The 
true power, however, is seen through the eyes of our customers.

When a health care provider in Georgia achieves annual IT savings of $1 million, they see it. It’s very 
clear to the large retail chain that can now handle four times as many sales transactions per second. 
Investors see it when a global pharmaceutical ﬁ rm accelerates its time-to-market by six months. 
Millions see it when a bank that can expand their branch network and offer a “bank-in-a-van” to 
underserved, remote locations in India. It’s behind the scenes, reducing the paper usage of a major 
airline by 1.5 million sheets of paper per year. And it’s quite visible when the world’s third-largest 
grocer slashes their power consumption and carbon emissions. Through our customers, we see the 
future, we see possibilities and we see the power of simplicity.

Over the next three years, squeezed between declining budgets and IT consumerization, thousands 
of CIOs will have an “a-ha moment.” The gap between the web and enterprise computing will no 
longer be defensible—to users, to the CEO, or to the CFO. We are at the epicenter of this IT revolution. 
This is how we’ll continue to drive long-term value for shareholders, employees and customers.

The board, our employees and I thank you for your support and conﬁ dence. 

Sincerely,

MarkTempleton
President and CEO

Annual Report 2008 • Citrix Systems, Inc. 7

[THIS PAGE INTENTIONALLY LEFT BLANK]

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

(Mark One)
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2008

or

‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934
For the transition period from

to
Commission File Number 0-27084

CITRIX SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

75-2275152
(I.R.S. Employer
Identification No.)

851 West Cypress Creek Road
Fort Lauderdale, Florida 33309
(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (954) 267-3000

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $.001 Par Value
(Title of each class)

The NASDAQ Stock Market LLC
(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities

Act. Yes È No ‘

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the

Act. Yes ‘ No È

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes È No ‘

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not

be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. ‘

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer or a smaller

reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in 12b-2 of the
Exchange Act.
È Large accelerated filer
‘ Non-accelerated filer

‘ Accelerated filer
‘ Smaller reporting company

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ‘ No È
The aggregate market value of Common Stock held by non-affiliates of the registrant computed by reference to the price of the
registrant’s Common Stock as of the last business day of the registrant’s most recently completed second fiscal quarter (based on the last
reported sale price on The Nasdaq Global Select Market as of such date) was $5,275,208,469. As of February 20, 2009 there were
180,113,587 shares of the registrant’s Common Stock outstanding.

The registrant intends to file a proxy statement pursuant to Regulation 14A within 120 days of the end of the fiscal year ended
December 31, 2008. Portions of such proxy statement are incorporated by reference into Part III of this Annual Report on Form 10-K.

DOCUMENTS INCORPORATED BY REFERENCE

CITRIX SYSTEMS, INC.

TABLE OF CONTENTS

Part I:

Item 1

Item 1A.

Item 1B.

Item 2

Item 3

Item 4

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . .

Part II:

Item 5

Item 6

Item 7

Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Management’s Discussion and Analysis of Financial Condition and Results of

Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . .

Item 8

Item 9

Item 9A.

Item 9B.

Part III:

Item 10

Item 11

Item 12

Item 13

Item 14

Part IV:

Financial Statements and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in and Disagreements with Accountants on Accounting and Financial

Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . .

Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Certain Relationships and Related Transactions, and Director Independence . . . . . . . .

Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

14

32

32

32

33

34

35

36

61

62

62

62

65

66

66

66

67

67

Item 15

Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

68

2

PART I

This Annual Report on Form 10-K contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. Actual results could differ materially from those set forth in the forward-looking
statements. Certain factors that might cause such a difference are discussed in this report, including in
Part I, Item 1A “Risk Factors” beginning on page 14.

ITEM 1. BUSINESS

General

Citrix Systems, Inc. is a Delaware corporation founded on April 17, 1989. We design, develop and market

technology solutions that allow applications to be delivered, supported, and shared on-demand with high
performance, enhanced security, and improved total cost of ownership, or TCO. We market and license our
products through multiple channels such as value-added resellers, or VARs, channel distributors, system
integrators, or SIs, independent software vendors, or ISVs, our Websites and original equipment manufacturers,
or OEMs.

Business Overview

Our goal is to enable a world where virtually anyone can work from almost anywhere. In our drive to

achieve our vision, we have been an innovator in the information technology, or IT, industry for almost two
decades.

Our three main waves of innovation have had a significant impact on the IT industry:

• Our first wave of innovation, in the mid-1990s, enabled the virtualization of the Windows desktop with

our WinFrame® product. This in turn enabled thin-client computing.

• Our second wave of innovation, from the late 1990s to the early 2000s, focused on bringing the

advantages of application virtualization and IT centralization to businesses with our MetaFrame® line
of presentation server products. When an application is virtualized, the business logic of the application
runs on a central server, and only screen pixels, keystrokes, and mouse movements—not actual data—
are transmitted via an encrypted channel to the user’s computer. Keeping applications under the
centralized control of IT administrators enhances data security and reduces the costs of managing
separate clients and applications on every user’s desktop. Through our application virtualization
solutions, we became a market leader in server-based computing.

• Our third wave of innovation is ongoing, focusing on a unique and holistic approach to solving

application delivery problems, and equipping business to change on-demand. Since 2004, we have
transformed Citrix from a company with one product line, to one that offers a broad portfolio of
solutions that make people more productive through on-demand access to applications from virtually
anywhere. In 2007, with the acquisition of XenSource, we’ve moved Citrix, a pioneer in the application
virtualization market, into the adjacent server and desktop virtualization markets. As a result, Citrix is
positioned as the only company to offer organizations an end-to-end application delivery infrastructure
that leverages the method of application, desktop and server virtualization best suited for the dynamic
delivery of applications to virtually any user.

During this period from 2004 to 2008, our revenues have grown from $741.2 million in 2004 to $1.58

billion in 2008.

Today, we design, develop, market, sell and support multiple products in an IT market category called

Application Delivery Infrastructure. Our product family brand for all our infrastructure solutions is the Citrix
Delivery Center™.

3

We also offer our GoTo services - GoToMyPc®, GoToMeeting®, GoToAssist®, GoToWebinar® and all

their variants, collectively called Online Services, through our Online Services division.

Products

We develop and market comprehensive solutions across all dimensions of application, server and desktop
virtualization as well as application and network optimization under the product brand Citrix Delivery Center™.
In many cases, IT organizations have not taken a holistic, architectural approach to application delivery. Instead
they have taken an incremental approach creating IT systems for delivering applications that are too static, too
complex, and costly to maintain. With the realities of slow-growing technology budgets and fast-changing
business needs, the strategic architectural approach to application, server and desktop delivery that we offer has
the capacity to enable business change.

This overview provides a discussion of our major products and service offerings in these areas.

Citrix Delivery Center

Application Virtualization

• Citrix® XenApp™ is a widely-deployed application virtualization solution that runs the business logic

of applications on a central server, transmitting only screen pixels, keystrokes, and mouse
movements—no actual data—via an encrypted channel to users’ computers. Keeping applications
under the centralized control of IT administrators enhances data security and reduces the costs of
managing separate clients and applications on every user’s desktop. XenApp runs on virtually any
platform, including Microsoft® Windows Server® 2008, Windows Server 2003 x64 Edition to
Windows Server 2003, Windows® 2000 Server and UNIX®. We offer XenApp as a stand alone product
in different editions. The Platinum Edition contains the most features of any version and adds critical
capabilities for application performance monitoring, secure sockets layers/virtual private network, or
SSL/VPN, remote access with SmartAccess control and single sign-on application security.

Desktop Virtualization

• Citrix® XenDesktop™, which was released in May 2008, is designed to overcome the challenges of

cost, complexity and user experience that have prevented virtual desktops from becoming a mainstream
enterprise reality in the past. XenDesktop is a fully integrated desktop delivery system, moving beyond
the limitations of existing virtual desktop infrastructure, or VDI, point solutions to ensure the simple,
secure, fast delivery of Windows desktops to any office worker over any network. Citrix XenDesktop
combines a powerful desktop delivery controller, based on Citrix Desktop Server™ with native
XenApp plug-in (formerly called ICA®) protocol support, Xen virtualization infrastructure for hosting
any number of virtual desktops in the datacenter, and virtual desktop provisioning to stream a single
desktop image on-demand to multiple virtual machines in the datacenter, based on Citrix Provisioning
Server™. XenDesktop is available in five versions, Platinum, Enterprise, Advanced, Standard and
Express. Platinum is the most feature rich version, and Express is offered free of charge.

Server Virtualization

• Citrix®XenServer™ is an enterprise-class platform for managing server virtualization in the datacenter
as a flexible aggregated pool of computing and storage resources. Based on the high-performance Xen
virtualization engine, XenServer combines comprehensive server virtualization capabilities with
scalability, performance and ease-of-use. The product line ranges from Citrix XenServer Express
Edition, a single-server solution available for free download, to the more comprehensive Citrix
XenServer Enterprise Edition, formerly XenEnterprise. In early 2008, we announced Citrix XenServer
Platinum Edition, which addresses both virtual and physical servers.

4

• Citrix Essentials ™ for XenServer™ and Hyper-V™, announced in February 2009, adds a set of

advanced management and automation capabilities to the Citrix and Microsoft server virtualization
platforms. This solution adds the following capabilities to existing virtualization management systems:
lab automation, high availability, provisioning, workflow orchestration and seamless integration with
leading storage systems.

Application Networking

• Citrix® NetScaler® Web application delivery solutions are purpose built appliances that accelerate

application performance up to five times, while simultaneously reducing datacenter costs. They provide
visibility into the end-user application experience and comprehensive Web application security in
concert with advanced traffic management. NetScaler is an ideal solution for any enterprise seeking
accelerated Web application performance, improved Web application security and increased
application availability. NetScaler is available in three versions: Platinum, Enterprise and Standard,
with the Platinum Edition containing the most features.

• Citrix Access Gateway™ is an SSL/VPN that securely delivers applications with policy-based

SmartAccess control. Users have easy-to-use secure access to the applications and data they need to be
productive. Organizations can cost effectively extend access to datacenter resources from outside the
office, while maintaining unprecedented control through comprehensive SmartAccess policies.

• Citrix Repeater™ solutions provide high-performance application delivery to branch office users that

increase productivity and reduce IT costs in the enterprise branch by delivering local area network-like
application performance over the wide area network, or WAN. Appliance products in the Citrix
Repeater family of solutions, including Citrix Branch Repeater™ (formerly WANScaler®) and Citrix
Branch Repeater™ with Windows Server®, developed in partnership with Microsoft, can accelerate
applications to datacenters and mobile workers. The AutoOptimizer™ Engine, which serves as the
cornerstone of the Citrix Repeater architecture, offers flexible deployment options. The Citrix Repeater
client software accelerates application delivery to other remote users including those in smaller branch
offices, home offices and business travelers, while users in larger branch offices are supported with
Citrix Repeater appliances.

In addition to these major products in these core market areas of application, desktop and server
virtualization, and application networking, we offer several feature capabilities customers can choose to add
value to our major products including EdgeSight®, Citrix Password Manager, Provisioning Server, Citrix
Application Firewall™ and Citrix Easy Call™. Further, we offer a remote access product, called Citrix Access
Essentials™, aimed at small businesses supporting up to 75 users.

Online Services

Online Services is focused on developing and marketing Web-based access, support and collaboration

software and services.

• GoToMyPC® is an online solution that provides secure, remote access to Windows® PC desktops from
virtually any Internet-connected computer. GoToMyPC, which sets up easily with a secure encrypted
connection, enables individuals to remotely use any resources hosted on their desktop just as though
they were sitting in front of it. GoToMyPC® Pro, tailored for the needs of professionals and small
offices, supports up to 50 PCs, rolls out secure, remote access for multiple users in minutes, and
features an administration Website in which managers can add, suspend and delete users and run usage
reports. GoToMyPC® Corporate is built for businesses that require detailed reporting, in-depth
administration features, assign and manage remote-access privileges for employees with advanced
security features.

5

• GoToMeeting® is an online, easy-to-use, secure and cost-effective solution for online meetings,

training sessions and collaborative gatherings. GoToMeeting allows a user with a PC or Mac and an
Internet browser to easily host, attend or participate in an online meeting or session without significant
training. GoToMeeting is capable of providing a standard PSTN conference dial-in number, voice over
Internet protocol (VOIP), or a user provided dial-in number. It features advanced secure
communication architecture that uses industry-standard secure sockets layers, or SSL. The service
offers flat-fee pricing for any number of meetings of any length, for up to 15 attendees per meeting. We
also offer GoToMeeting® Corporate which supports multiple organizer accounts, unlimited meetings
with up to 25 attendees, robust reporting, additional customization options and advanced administrative
capabilities.

• GoToAssist® is a leading, online, remote technical-support solution that enables organizations to

provide secure, on-demand support over the Internet. GoToAssist enables support staff to view and
control the desktop of a user, requires no client software or additional resources, works automatically
and securely through virtually every firewall, even over dial-up connections, and integrates into
existing infrastructure.

• GoToWebinar® is a simple and affordable solution to conduct online events, such as large sales

presentations and marketing events over the Internet. GoToWebinar has the capacity to scale to 1,000
attendees per event and includes such features as full-service registration with real-time reports,
customized branding of Webinar materials, automated e-mail templates, free integrated voice
conferencing or toll-free service, VoIP, attendee polling and survey capability, Webinar dashboard to
monitor audiences, and easy controls for quickly changing presenters.

In October 2008, we acquired Vapps, an audio services company, with advanced VOIP-based audio
technology. We plan to market conference calling services directly to small business users, or SMBs, and
enterprises based on Vapps’ audio services technology.

Technical Services

We provide a portfolio of services designed to allow our customers and entities with which we have a

technology relationship to maximize the value of our Citrix Delivery Center solutions. These services are
available are available for additional fees to customers.

• Consulting Services help ensure the successful implementation of our solutions. Tested methodologies,
certified professionals and best practices developed from real-world experience allow our consulting
services organization to provide guidance and support to partners and customers to maximize the
effectiveness of their access infrastructure implementations.

•

Technical Support Services accommodate the unique ongoing support needs of customers. Our
technical support services are specifically designed to address the variety of challenges facing access
infrastructure environments. We offer five support-level options, global coverage and personalized
relationship management.

• Product Training & Certification teaches customers and partners how to optimally utilize Citrix

products and keep their organizations running smoothly. Authorized Citrix training is available when
and how it is needed. Traditional or virtual instructor-led training offerings feature Citrix Certified
Instructors conducting scheduled classes in a classroom or remote setting at one of approximately 280
Citrix Authorized Learning Centers™, or CALCs, worldwide. CALCs are staffed with instructors that
have been certified by us and teach their students using Citrix-developed courseware. Self-Paced
Online offerings, available to students 24 hours a day, seven days a week, provide technically robust
course content without an instructor and often include hands-on practice via virtual labs. Certifications
are available for administrators, engineers, and architects.

6

Except for the Web-based desktop access, support and collaboration services offered by our Online Services

division, our other service activities are related to post-sale technical support, pre- and post-sale consulting and
product training services. Post-sale technical support is offered through Citrix-operated support centers located in
the United States, Ireland, Japan, Hong Kong and Australia. In most cases, we provide technical advice to
channel distributors and entities with which we have a technology relationship, who act as the first line of
technical assistance for end-users. In some cases, end-users can also choose from a Citrix-delivered fee-based
support program ranging from one-time incident charges to an enterprise-level support agreement covering
multiple sites and servers. In addition, we also provide free technical advice through online support systems,
including our Web-based “Knowledge Center.” For pre- and post-sale consulting, Citrix Consulting, a consulting
services organization, provides both exploratory and fee-based consulting services. These services include on-site
systems design and implementation services targeted primarily at enterprise-level clients with complex IT
environments. Citrix Consulting is also responsible for the development of best practice knowledge that is
disseminated to businesses with which we have a business relationship and end-users through training and
written documentation. Leveraging these best practices enables our integration resellers to provide more complex
systems, reach new buyers within existing customer organizations, and provide more sophisticated system
proposals to prospective customers.

Technology

Our products are based on a full range of industry-standard technologies. In addition, certain of our products

are also based on our proprietary technologies.

•

•

•

Independent Computing Architecture, or ICA® technology, is core to application virtualization that
allows an application’s graphical end-user interface to be displayed on almost any client device while
the application logic is executed on a central server. Centralizing application processing on the server
enables centralized management of applications, end-users, servers, licenses and other system
components for greater efficiency and lower cost. ICA technology also minimizes the amount of data
traveling across an end-user’s network by limiting the data transported to and from the client device to
encrypted screen refreshes, keystrokes and mouse clicks. This enhances access security, improves
application performance, lowers bandwidth consumption, and lowers the TCO for deploying and
accessing the latest, most powerful applications and information.

SmartAccess is a strategic aspect of Application Delivery and is the ability to ensure that application
delivery is tailored precisely to the needs of the user, the location and device from which access is
being attempted and the safeguards set by those who own and/or administer the accessed resources.
SmartAccess forms an important element of our Application Delivery Infrastructure value proposition.

The NetScaler® Software Packet Engine, or the Packet Engine, forms the foundation of our NetScaler
Application Delivery line of products. The Packet Engine allows high-performance networking and
packet processing without the need for special purpose hardware.

• Xen® open source technology is the basis for our hypervisor products. The Xen® hypervisor is a key
component of the XenServer™ product line. See Part I—Item 1A entitled “Risk Factors,” for more
information regarding the open source technology.

Customers

We take a unique and holistic approach to solving application delivery problems, and we equip businesses to

change—on-demand. We do this through an expansive product portfolio that brings enormous benefits and cost
savings to our customers. The strategic value that we offer brings multiple buyers to the table, each with a
different perspective on the problems we solve. We believe that the five primary IT buyers involved in decision-
making related to application delivery solutions are:

•

Strategic IT Executives are the senior executives, including chief information officers, chief technology
officers and vice presidents of infrastructure, who have responsibility for ensuring all applications are
delivered with the best performance, security and cost-savings.

7

• Network Architects are the people and groups responsible for delivering Web-based applications who

have primary responsibility for the WAN infrastructure for all applications.

•

IT Infrastructure Managers are the people and groups responsible for delivering Windows-based
applications.

• Desktop Operations Managers are the people and groups responsible for managing Windows Desktop

environments.

•

Server Operations Managers are the people and groups responsible for managing the datacenter.

In addition to these five primary IT buyers, we market and sell access and collaboration software and
services to consumers and small businesses through our Online Services division. Our Online Services division
also markets and sells Web-based remote support systems to corporate help desks.

We offer perpetual and term-based software licenses for our Citrix Delivery Center™ products, along with
annual subscriptions for software maintenance, technical support and online services. Perpetual licenses allow
our customers to use the version of software initially purchased into perpetuity while term-based licenses are
limited to a specified period of time. Software maintenance gives customers the right to upgrade to new software
versions if and when any updates are delivered during the maintenance term. Perpetual license software products
come primarily in electronic-based forms, and we also offer packaged shrink-wrap products to meet our customer
form factor requirements. Our Online Services products can be accessed over the Internet during the subscription
period. Our hardware appliances come pre-loaded with software for which customers can purchase perpetual
licenses and annual maintenance.

Technology Relationships

We have entered into a number of technology relationships to develop customer markets for our products
for distributed Windows and non-Windows applications and to accelerate the development of our existing and
future product lines.

Microsoft

Since our inception, we have had a number of license agreements with Microsoft. These agreements have
provided us with access to certain Microsoft source and object code, technical support and other materials. We
also have licensed our multi-user Windows NT extensions to Microsoft for inclusion in Microsoft’s Windows
Server products.

In December 2004, we entered into a technology collaboration agreement with Microsoft to further enhance

the overall ability to extend Windows® Terminal Server. In conjunction with the technology collaboration
agreement, we and Microsoft entered into a patent cross license and source code licensing agreements that
extended our access to source code for current versions of Microsoft Windows Server. The technology
collaboration agreement also provides us access to the source code for Microsoft Windows Server 2008; and in
September 2007, we signed a source code license with Microsoft for the general release version of Windows
Server 2008. The technology collaboration agreement has a five-year term which expires in December 2009. The
technology collaboration, patent cross license and source code licensing agreements do not provide for payments
to or from Microsoft.

There can be no assurances that our agreements with Microsoft will be extended or renewed by Microsoft
upon their respective expirations or that, if renewed or extended, such agreements will be on terms favorable to
us. See Part 1—Item 1A entitled “Risk Factors” for more information on our agreements with Microsoft.

Intel

In December 2008, we entered into an agreement with Intel Corporation, or Intel, to develop virtualization

solutions that will optimize the delivery of applications and desktops to Intel processor based devices.

8

Additional Relationships

Currently, numerous devices incorporate Citrix ICA, including Windows CE devices, Macintosh clients,
Linux Terminals, and other information appliances, such as wireless phones and other handheld devices. ICA
licensees include Wyse Technologies, Hewlett-Packard Company, Fujitsu Limited, and Philips Speech
Recognition Systems, among others.

In addition, we have initiated the Citrix Partner Network™, which is a coalition of approximately 10,000
companies from across the IT spectrum that design and market solutions that are complementary to the Citrix
product family. An initiative called Citrix Ready™ was introduced in 2007 as part of the Citrix Global Alliance
Program™. Citrix Ready identifies recommended solutions that are trusted to enhance the Citrix Delivery
Center. All products featured in Citrix Ready have completed verification testing, providing confidence in joint
solution compatibility. By leveraging our industry leading alliances and Partner Network, Citrix Ready
showcases select trusted solutions designed to meet various business needs. Through an online catalog and our
Citrix Ready branding program, customers can easily find and build a trusted application delivery infrastructure.
For further information on the Citrix Partner Network see “—Sales, Marketing and Support.”

Research and Development

We focus our research and development efforts on developing new products and core technologies in the

Application Delivery Infrastructure market and further enhancing the functionality, reliability, performance and
flexibility of existing products. We solicit extensive feedback concerning product development from customers,
both directly from and indirectly through our channel distributors. In addition, over the past several years,
acquisitions have played an important role in establishing ourselves as a leading provider of Application Delivery
Infrastructure products. Our key strategic acquisitions include:

•

•

•

•

In 2005, we acquired additional expertise in Web application optimization, Transmission Control
Protocol, multiplexing, multi-protocol compression, SSL acceleration, application traffic management,
dynamic caching and Web application firewall technologies;

In 2006, we acquired additional expertise in tools that monitor the end-user experience, WAN
optimization and acceleration;

In 2007, we made strategic acquisitions to position ourselves in the fast-growing server and desktop
virtualization markets; and

In 2008, we acquired quality of service, or QoS, technology capabilities to be integrated into our Citrix
Repeater products.

We believe that our software development teams and core technologies represent a significant competitive

advantage for us. Included in the software development teams is a group focused on research activities that
include prototyping ways to integrate emerging technologies and standards into our product offerings, such as
emerging Web services technologies, management standards and Microsoft’s newest technologies. Many groups
within the software development teams have expertise in XML-based software development, integration of
acquired technology, multi-tier Web-based application development and deployment, SSL secure access,
hypervisor technologies and building software as a service. We maintain teams working close to Microsoft in
Redmond, Washington which are focused on enhancing and adding value to the next generation of Microsoft
Windows Server, virtualization and management products. We incurred research and development expenses of
approximately $288.1 million in 2008, $205.1 million in 2007 and $155.3 million in 2006.

Sales, Marketing and Services

We market and license our products and services primarily through multiple channels worldwide, including
VARs, channel distributors, SIs and ISVs, our Websites and OEMs, managed by our worldwide sales force. We
provide training and certification to integrators, VARs and consultants for a full-range of Citrix-based
infrastructure products, solutions and services through our Citrix Partner Network. In addition, our Online
Services division provides software as a service through direct sales and our Websites.

9

In 2008, we continued to focus our efforts on increasing the productivity of our existing partners and
building capacity through recruitment of new partners to sell and implement our expanding product portfolio,
including an effort to recruit partners to sell and implement XenServer, our server virtualization product. We
continue to see success with our innovative channel incentive program, Citrix Advisor Rewards. The Citrix
Advisor Rewards™ program is an innovative influencer program that rewards our partners for registering
projects and providing value-added selling even if they do not fulfill the product. This program has helped limit
channel conflict and increase partner loyalty to us. We regularly take actions to improve the effectiveness of our
partner programs, and to strengthen our channel relationships, including managing non-performing partners,
adding new partners with expertise in selling into new markets, and forming additional relationships with global
and regional SIs and ISVs. SIs and ISVs are becoming a more substantial part of our strategy in the large
enterprise and government markets. The SI program includes members such as Accenture Ltd., Atos Origin,
Computer Sciences Corporation, Electronic Data Systems Corporation, Fujitsu-Siemens Computers GmbH,
Hewlett-Packard Company, IBM Global Services, Infosys Technologies Limited and TATA Consultancy
Services Limited, among others. The ISV program has a strong representation from targeted industry verticals
such as healthcare, financial services and telecommunications. Members in the ISV program include Cerner
Corporation, Epic Systems Corporation, ESRI, McKesson Corporation, Microsoft, Oracle Corporation, Sage
Group plc, SAP AG and Siemens Medical Health Solutions, among many others.

Our sales and marketing organization actively supports our channel distributors and VARs. Our sales
organization consists of field-based systems sales engineers and corporate sales professionals. Additional sales
personnel, based all over the world support these field personnel. These additional sales personnel recruit
prospective customers, provide technical advice with respect to our products and work closely with key channel
distributors and VARs of our products.

Although we work with multiple channel distributors and VARs, one channel distributor, Ingram Micro,
accounted for 12% of our total net revenues in 2008 and 10% of our total net revenues in 2007 and 2006. Our
channel distributor arrangements with Ingram Micro consist of several non-exclusive, independently negotiated
agreements with its subsidiaries, each of which covers different countries or regions. Each of these agreements is
separately negotiated and is independent of any other contract (such as a master distribution agreement). None of
these contracts was individually responsible for over 10% of our total net revenues in each of the last three fiscal
years. In addition, there was no individual VAR that accounted for over 10% of our total net revenues in 2008,
2007 and 2006.

Our marketing department provides training, sales event support, sales collateral, advertising, direct mail

and public relations coverage to our indirect channels to aid in market development and in attracting new
customers. In addition, marketing for our Online Services division utilizes multiple venues including radio,
television and online advertising.

The Citrix Partner Network™ includes three categories of partners: Citrix Solution Advisor™, Citrix Global

Alliance Partners™, and Citrix Certified™ Education Professional. This network represents the knowledge,
skills and experience of the entire spectrum of our partners around the world, and makes it easier for end-users to
engage their services and benefit from their solutions. Equally important, the Citrix Partner Network is designed
to help partners build their business by sharing in opportunities for planning and implementing application
delivery infrastructure solutions that arise from mutual customers and complement the sale of their own products.

We provide most of our channel distributors with stock-balancing and price protection rights, although the
amount of inventory on hand with channel distributors is very small. These amounts are estimated and provided
for at the time of sale as a reduction of revenue. Stock balancing rights permit channel distributors to return
products to us up to the forty-fifth day of the fiscal quarter, subject to ordering an equal dollar amount of our
other products prior to the last day of the same fiscal quarter. We are not obligated to accept product returns from
our channel distributors under any other conditions, unless the product item is defective in manufacture. Product
items returned to us under the stock-balancing program must be in new, unused and unopened condition. Price

10

protection rights require that we grant retroactive price adjustments for inventories of our products held by
channel distributors or VARs if we lower our prices for such products. In the event that we decide to reduce our
prices, we will establish a reserve to cover exposure to channel distributor inventory. We have not reduced and
have no current plans to reduce the prices of our products for inventory currently held by channel distributors or
VARs. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical
Accounting Policies and Estimates” and Note 2 to our consolidated financial statements included in this Annual
Report on Form 10-K for the year ended December 31, 2008 for information regarding our revenue recognition
policy.

International revenues (sales outside the United States) accounted for approximately 45.8% of our net

revenues for the year ended December 31, 2008, 44.5% of our net revenues for the year ended December 31,
2007 and 47.4% for the year ended December 31, 2006. For detailed information on our international revenues,
please refer to Note 12 to our consolidated financial statements included in this Annual Report on Form 10-K for
the year ended December 31, 2008.

Operations

We control all purchasing, inventory, scheduling, order processing and accounting functions related to our

operations. For our Application and Server Virtualization products, production, warehousing and shipping are
performed internally in the United States and by independent contractors on a purchase order basis in Ireland,
depending upon the customer’s geographic market. Master software CD-ROMs, development of user manuals,
packaging designs, initial product quality control and testing are primarily performed at our facilities. In some
cases, independent contractors also duplicate CD-ROMs, print documentation and package and assemble
products to our specifications. Production, final test, warehousing and shipping for our Application Networking
products, including our Citrix Repeater appliance products, NetScaler products and Access Gateway products are
primarily performed by a third-party contract manufacturer.

For our Application and Server Virtualization products, internal manufacturing capabilities and independent
contractors provide a redundant source of manufacture and assembly. For our Application Networking products,
internal manufacturing capabilities and independent contractors provide us with the flexibility needed to meet our
customer product and delivery requirements. We have manufacturing relationships primarily with Flextronics
and Super Micro Computer, Inc., under which we have subcontracted the majority of our manufacturing activity.
This subcontracting activity extends from prototypes to full production and includes activities such as material
procurement, final assembly, test, control, shipment to our customers and repairs. Together with our contract
manufacturers, we design, specify and monitor the tests that are required to meet internal and external quality
standards. Our contract manufacturers manufacture our products based on forecasted demand for our products.
Each of the contract manufacturers procures components necessary to assemble the products in our forecast and
test the products according to our specifications. Products are then shipped to our channel distributors, VARs or
end-users. If the products go unsold for specified periods of time, we may incur carrying charges or obsolete
material charges for products ordered to meet our forecast or customer orders. In 2008, we did not experience
any material difficulties or significant delays in the manufacture and assembly of our products.

We do not believe that backlog, as of any particular date, is a reliable indicator of future performance. While

it is generally our practice to promptly ship product upon receipt of properly finalized purchase orders, we
sometimes have orders that have not shipped. Although the amount of such product license orders may vary, the
amount, if any, of such orders at the end of a particular period is not material to our business.

We believe that our fourth quarter revenues and expenses are affected by a number of seasonal factors,

including the lapse of many corporations’ fiscal year budgets and an increase in amounts paid pursuant to our
sales compensation plans due to increases in fourth quarter revenue. We believe that these seasonal factors are
common within our industry. Such factors historically have resulted in first quarter revenues in any year being
lower than the immediately preceding fourth quarter. We expect this trend to continue through the first quarter of

11

2009. In addition, our European operations generally generate lower revenues in the summer months because of
the generally reduced economic activity in Europe during the summer. This seasonal factor also typically results
in higher fourth quarter revenues.

Competition

We sell our products in intensely competitive markets. Some of our competitors and potential competitors

have significantly greater financial, technical, sales and marketing and other resources than we do. The
competitive environment for each core product area is described below.

Citrix Delivery Center

• Application Virtualization—We are the global leader in application virtualization, and we believe that
our flagship product, XenApp, provides a greater level of features, functionality, and interoperability
with other virtualization technologies than the products of our competitors. In addition, we have the
benefit of being the first to market in application virtualization and of having established a very large
installed customer base. Our primary competition in the application virtualization market is VMware,
Inc.’s ThinApp product suite. The predecessor to ThinApp, Thinstall, was developed and marketed by a
private company and did not pose a serious competitive threat to XenApp. Now Thinstall has been
acquired by VMware, which has significantly more resources, ThinApp may pose a greater competitive
challenge to us in the future.

• Desktop Virtualization—XenDesktop, our desktop virtualization product, is a new product and a new

way of managing desktops. Our primary competition in desktop management is the existing IT practice
of managing physical desktops as a device. Citrix’s vision is to enable IT executives to rethink how
desktops can be delivered as a service rather than viewing desktops as a device. We believe that the
competitive advantage of XenDesktop is that it reduces the costs of traditional desktop management
methods by virtualizing desktops so they can be more easily and efficiently maintained.

•

Server Virtualization—With respect to our XenServer or server virtualization product, we compete
primarily with VMware, who was first to market with server virtualization and widely regarded as the
market leader. We believe that our existing product offering is competitive in terms of scalability and
enterprise-class capabilities with VMware’s products, and we are differentiating ourselves by offering
a greater level of interoperability. Further, in February 2009, we announced that we would offer an
enterprise-class XenServer product for free, lowering the entry price of server virtualization for
businesses of all sizes, and make available advanced management and automation capabilities through
Citrix®Essentials ™ for XenServer™. In 2008, Microsoft entered this market with a hypervisor-based
server virtualization product called Hyper-V, a product for which we provide advanced virtualization
and management capabilities through our Citrix®Essentials ™ for Hyper-V™ product announced in
February 2009 . We are also optimizing our server virtualization products for other Citrix products and
third party products to offer end-to-end application delivery solutions.

• Application Networking—Our NetScaler or web application delivery products compete against other
established competitors including, Cisco Systems, Inc., or Cisco, and F5 Networks, Inc., or F5. Both
competitors compete with Citrix for traditional enterprise sales opportunities, while F5 is Citrix’s
principal competitor in the Internet-centric market segment. Both Cisco and F5 feature products with
varying levels of functionality. We continue to enhance NetScaler’s feature capability and aggressively
market NetScaler to our existing customer base. Our Access Gateway or SSL/VPN product faces
competition from Cisco and Juniper Networks, Inc., or Juniper. Both competitors are well known and
established in the SSL/VPN market. In contrast, Citrix has not had a presence in that market for as long
as its competitors and does not command the same level of brand recognition. We do, however, have
the largest market share measured in units. Our competitive success in this market has come from
bundling our SSL/VPN product with our other products, primarily XenApp, to offer a comprehensive
end-to-end application delivery solution, a key differentiator for Citrix. Our Citrix Repeater family of

12

products compete with Cisco, Riverbed Technology, Inc., or Riverbed, and Blue Coat Systems, or Blue
Coat. Cisco enjoys the largest market share, benefiting from their leadership in the networking market.
Riverbed and Bluecoat are less established companies than Citrix, but have the advantage of being
focused solely on WAN optimization. Citrix continues to develop enhanced features and functionality
for its Citrix Repeater products, in addition to optimizing their performance with existing Citrix
products, to differentiate them from our competition. We are also able to bundle them with existing
products and aggressively market them to our installed-base, which we believe gives us a competitive
advantage.

Online Services

We believe, that our remote access, or GoToMyPC service, and our collaboration services, which include
GoToMeeting and GoToWebinar, continue to maintain a solid leadership position, particularly among SMBs in
extremely competitive markets. GoToMeeting’s “all-you-can-meet” pricing has proven attractive to users. Our
primary competition in web conferencing for GoToMeeting and GoToWebinar remains the market leader,
Cisco’s WebEx. In remote support, we compete with Cisco’s WebEx and LogMeIn.

We believe that we will further address the needs of the broad remote support market, with GoToAssist
Express, which was released in February 2009. GoToAssist Express is a remote support service that is purpose-
built for individual users, consultants and small businesses. With this addition to GoToAssist Corporate, we will
be the only provider of purpose-built remote support solutions for all segments of the market. In remote access,
GoToMyPC remains the market leader in revenue.

We continue to differentiate our services with improved feature functionality and capabilities for all
products, while focusing on our key competitive differentiator—delivering an excellent customer experience
through simple, secure, reliable and cost efficient services.

As the markets for our products and services continue to develop, additional companies, including

companies with significant market presence in the computer appliances and software and networking industries,
could enter the markets in which we compete and further intensify competition. In addition, we believe price
competition could become a more significant competitive factor in the future. As a result, we may not be able to
maintain our historic prices and margins, which could adversely affect our business, results of operations and
financial condition. See “—Technology Relationships” and Part I—Item 1A entitled “Risk Factors.”

Proprietary Technology

Our success is dependent upon certain proprietary technologies and core intellectual property. We have been

awarded a number of domestic and foreign patents and have a number of pending patent applications in the
United States and foreign countries. Our technology is also protected under copyright laws. Additionally, we rely
on trade secret protection and confidentiality and proprietary information agreements to protect our proprietary
technology. We have trademarks or registered trademarks in the United States and other countries, including
Citrix®, Citrix Access Gateway™, Citrix App Receiver™, Citrix Delivery Center™, Citrix EasyCall™, Citrix
Provisioning Server™, Citrix RepeaterTM, Citrix Subscription Advantage™, Citrix Synergy™, Branch
Repeater™, GoToAssist®, GoToMeeting®, GoToMyPC®, GoToWebinar®, HDX™, ICA®, NetScaler®,
WANScaler™, Xen®, XenApp™, XenDesktop™, and XenServer™. While our competitive position could be
affected by our ability to protect our proprietary information, we believe that because of the rapid pace of
technological change in the industry, factors such as the technical expertise, knowledge and innovative skill of
our management and technical personnel, our technology relationships, name recognition, the timeliness and
quality of support services provided by us and our ability to rapidly develop, enhance and market software
products could be more significant in maintaining our competitive position. See Part I—Item 1A entitled “Risk
Factors.”

13

Available Information

Our Internet address is http://www.citrix.com. We make available, free of charge, on or through our Website
our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements
on Form DEF 14A and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act as soon as reasonably practicable after such material is electronically filed with or
furnished to the Securities and Exchange Commission. The information on our Website is not part of this Annual
Report on Form 10-K for the year ended December 31, 2008.

Employees

As of December 31, 2008, we had 5,040 employees. On January 28, 2009, we announced a strategic

restructuring program which included steps to reduce our headcount by approximately 500 full-time positions, or
approximately 10% of our global workforce. We believe our relations with employees are good. In certain
countries outside the United States, our relations with employees are governed by labor regulations.

ITEM 1A. RISK FACTORS

Our operating results and financial condition have varied in the past and could in the future vary significantly

depending on a number of factors. From time to time, information provided by us or statements made by our
employees contain “forward-looking” information that involves risks and uncertainties. In particular, statements
contained in this Annual Report on Form 10-K for the year ended December 31, 2008, and in the documents
incorporated by reference into this Annual Report on Form 10-K for the year ended December 31, 2008, that are not
historical facts, including, but not limited to statements concerning new products, development and offerings of
products and services, market positioning, Application Networking, Application Performance Monitoring, Citrix
Delivery Center, Desktop Virtualization, Server Virtualization, Application Virtualization, Subscription Advantage,
XenApp, NetScaler, XenServer and XenDesktop, Citrix Ready, Citrix Repeater products and Access Gateway, our
Partner Network, Product Licenses, cash and non-cash charges, product and price competition, our Online Services
division, competition and strategy, customer diversification, employees, suppliers, contract manufacturers, product
price and inventory, contingent consideration payments, deferred revenues, government regulation (including the
FCC), seasonal factors, natural disasters, stock-based compensation, licensing and subscription renewal programs,
computer system enhancements, international operations and expansion, revenue recognition, profits, growth of
revenues, composition of revenues, cost of net revenues, operating expenses, sales and sales cycle, marketing and
support expenses, general and administrative expenses, research and development expenses, obsolete materials
charges, royalty payments, valuations of investments and derivative instruments, technology relationships, open
source software, reinvestment or repatriation of foreign earnings, gross margins, amortization expense, goodwill and
intangible assets, interest income, interest expense, impairment charges, anticipated operating and capital
expenditure requirements, cash inflows, contractual obligations, our Credit Facility, in-process research and
development, tax rates and deductions, tax liabilities and benefits, SFAS No. 109, SFAS No. 123R, SFAS
No. 141R, SFAS No. 157, SFAS No. 160, SFAS No. 161, leasing activities and obligations, acquisitions, stock
repurchases, investment transactions (including our investment in bonds issued by AIG Matched Funding
Corporation (the “AIG Capped Floater”) and investments in auction rate and available-for-sale securities) changes
in domestic and foreign economic conditions and credit markets, restructuring activities (including our Strategic
Restructuring Program), customer delays or reductions in technology purchases, liquidity, litigation matters,
intellectual property matters, distribution channels, stock price, payment of dividends, Advisor Rewards program,
Microsoft agreements the Intel agreement, price protection rights, proprietary technology, security measures, third
party licenses, and potential debt or equity financings constitute forward-looking statements and are made under the
safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These statements are neither promises nor guarantees. Our actual results of
operations and financial condition have varied and could in the future vary materially from those stated in any
forward-looking statements. The following factors, among others, could cause actual results to differ materially
from those contained in forward-looking statements made in this Annual Report on Form 10-K for the year ended
December 31, 2008, in the documents incorporated by reference into this Annual Report on Form 10-K or presented

14

elsewhere by our management from time to time. Such factors, among others, could have a material adverse effect
upon our business, results of operations and financial condition. We caution readers not to place undue reliance on
any forward-looking statements, which only speak as of the date made. We undertake no obligation to update any
forward-looking statement to reflect events or circumstances after the date on which such statement is made.

Adverse changes in general economic conditions in the United States or any of the major countries in which
we do business could adversely affect our operating results.

As a global company, we are subject to the risks arising from adverse changes in global economic and
market conditions. The worldwide economy is currently undergoing unprecedented turmoil amid stock market
volatility, difficulties in the financial services sector, tightening of the credit markets, softness in the housing
markets, concerns of inflation and deflation, reduced corporate profits and capital spending, and continuing
economic uncertainties. This recession and the uncertainty about future economic conditions could negatively
impact our current and prospective customers and result in delays or reductions in technology purchases. As a
result, we could experience fewer orders, longer sales cycles, slower adoption of new technologies and increased
price competition, any of which could materially and adversely affect our business, results of operations and
financial condition. The adverse economic conditions also may negatively impact our ability to obtain payment
for outstanding debts owed to us by our customers or other parties with whom we do business. We cannot predict
the timing, strength or duration of this severe global economic recession or subsequent recovery.

Our business could be adversely impacted by conditions affecting the information technology market.

The demand for our products and services depends substantially upon the general demand for business-related

computer appliances and software, which fluctuates based on numerous factors, including capital spending levels,
the spending levels and growth of our current and prospective customers, and general economic conditions.
Fluctuations in the demand for our products and services could have a material adverse effect on our business,
results of operations and financial condition. Moreover, the purchase of our products is often discretionary and may
involve a significant commitment of capital and other resources. As a result of poor general economic and market
conditions, future economic projections for the information technology sector are uncertain as companies reassess
their spending for technology projects. In the past, adverse economic conditions decreased demand for our products
and negatively impacted our financial results. If an unfavorable environment for information technology spending
continues, it could negatively impact our business, results of operations and financial condition.

Our long sales cycle for enterprise-wide sales could cause significant variability in our revenue and operating
results for any particular period.

In recent quarters, a growing number of our large and medium-sized customers have decided to implement

our enterprise customer license arrangements on a departmental or enterprise-wide basis. Our long sales cycle for
these large-scale deployments makes it difficult to predict when these sales will occur, and we may not be able to
sustain these sales on a predictable basis.

We have a long sales cycle for these enterprise-wide sales because:

•

•

•

•

our sales force generally needs to explain and demonstrate the benefits of a large-scale deployment of
our product to potential and existing customers prior to sale;

our service personnel typically spend a significant amount of time assisting potential customers in their
testing and evaluation of our products and services;

our customers are typically large and medium size organizations that carefully research their
technology needs and the many potential projects prior to making capital expenditures for software
infrastructure; and

before making a purchase, our potential customers usually must get approvals from various levels of
decision makers within their organizations, and this process can be lengthy.

15

The continued long sales cycle for these large-scale deployment sales could make it difficult to predict the

quarter in which sales will occur. Delays in sales could cause significant variability in our revenue and operating
results for any particular period.

We face intense competition, which could result in fewer customer orders and reduced revenues and margins.

We sell our products in intensely competitive markets. Some of our competitors and potential competitors
have significantly greater financial, technical, sales and marketing and other resources than we do. For example,
our ability to market our Application Virtualization products, including XenApp, Access Essentials, Password
Manager and other future product offerings and upgrades, could be affected by Microsoft’s licensing and pricing
scheme for client devices, servers and applications. Further, the announcement of the release, and the actual
release, of new Windows-based server operating systems or products incorporating similar features to our
products could cause our existing and potential customers to postpone or cancel plans to license certain of our
existing and future product and service offerings. In addition, alternative products for application delivery
directly and indirectly compete with our current product lines and our online services.

Existing or new products and services that provide alternatives to our products and services, including those
relating to application virtualization, server and desktop virtualization Web application optimization, application
performance monitoring, branch office application delivery and WAN optimization, virtual desktop delivery,
secure sockets layers/virtual private network, gateways, on-demand assistance, online collaboration and IP
telephony, can materially impact our ability to compete in these markets.

Our current competitors in these markets include Cisco, F5, Juniper, Riverbed, VMware, Microsoft and

Blue Coat. For further discussion of the competitive environment for our products, see the section entitled
“Competition” in Part 1—Item 1.

As the markets for our products and services continue to develop, additional companies, including
companies with significant market presence in the computer appliances, software and networking industries
could enter the markets in which we compete and further intensify competition. In addition, we believe price
competition could become a more significant competitive factor in the future. As a result, we may not be able to
maintain our historic prices and margins, which could adversely affect our business, results of operations and
financial condition.

Sales of our Application Virtualization products constitute a majority of our revenue and decreases in demand
for our Application Virtualization products could adversely affect our results of operations and financial
condition.

We anticipate that sales of our Application Virtualization products and related enhancements and upgrades

will constitute a majority of our revenue for the foreseeable future. Our ability to continue to generate revenue
from our Application Virtualization products will depend on market acceptance of Windows Server Operating
Systems and/or UNIX Operating Systems. Declines and variability in demand for our Application Virtualization
products could occur as a result of:

•

•

•

•

•

•

new competitive product releases and updates to existing products;

termination of our product offerings and enhancements;

potential market saturation;

technological change;

general economic conditions; or

lack of success of entities with which we have a technology relationship.

16

If our customers do not continue to purchase our Application Virtualization products as a result of these or

other factors, our revenue would decrease and our results of operations and financial condition would be
adversely affected. In addition, modification or termination of certain of our Application Virtualization products
may cause variability in our revenue and make it difficult to predict our revenue growth and trends in our
Application Virtualization products as our customers adjust their purchasing decisions in response to such events.

Our Server Virtualization products and services are based on an emerging technology, the market for this line
of products and services remains uncertain.

Our Server Virtualization products and services are based on an emerging technology platform, the success
of which will depend on organizations and customers perceiving technological and operational benefits and cost
savings associated with adopting server and desktop virtualization solutions. The relatively limited extent to
which server virtualization solutions have been adopted may make it difficult to evaluate this technology’s
impact on our business because the market for these products and services remains uncertain. To the extent that
the server virtualization market develops more slowly or less comprehensively than we expect, the revenue
growth associated with virtualization products and services may be slower than currently expected, which could
adversely affect our business, results of operations and financial condition.

We acquired XenSource in October 2007 with the expectation that the acquisition would result in various

benefits including, among other things, enhanced revenue and profits, greater market presence and development,
and enhancements to our product portfolio and customer base. The acquisition of XenSource moved us into the
adjacent server and desktop virtualization markets, which we believe will allow us to extend our leadership in the
broader Application Delivery Infrastructure market by adding key enabling technologies that make the
end-to-end computing environment more flexible, dynamic and responsive to business change. We may not
realize any of these benefits.

If we do not develop new products and services or enhancements to our existing products and services, our
business, results of operations and financial condition could be adversely affected.

The markets for our products and services are characterized by:

•

•

•

•

•

rapid technological change;

evolving industry standards;

fluctuations in customer demand;

changes in customer requirements; and

frequent new product and service introductions and enhancements.

Our future success depends on our ability to continually enhance our current products and services and
develop and introduce new products and services that our customers choose to buy. If we are unable to keep pace
with technological developments and customer demands by introducing new products and services and
enhancements, our business, results of operations and financial condition could be adversely affected. Our future
success could be hindered by:

•

•

•

delays in our introduction of new products and services;

delays in market acceptance of new products and services or new releases of our current products and
services; and

our, or a competitor’s, announcement of new product or service enhancements or technologies that
could replace or shorten the life cycle of our existing product and service offerings.

In order for a number of our products to succeed in the future, we believe the demand for technology will

need to shift from the types of products and services we and our competitors have sold in the past to a new
generation of products we now offer. For example, we cannot guarantee that our Citrix Delivery Center products

17

and Online Services will achieve the broad market acceptance by our channel partners and entities with which we
have a technology relationship, customers and prospective customers necessary to generate significant revenue.
In addition, we cannot guarantee that we will be able to respond effectively to technological changes or new
product announcements by others. If we experience material delays or sales shortfalls with respect to our new
products and services or new releases of our current products and services, those delays or shortfalls could have a
material adverse effect on our business, results of operations and financial condition.

We believe that we could incur additional costs and royalties as we develop, license or buy new

technologies or enhancements to our existing products. These added costs and royalties could increase our cost of
revenues and operating expenses. However, we cannot currently quantify the costs for such transactions that have
not yet occurred. In addition, we may need to use a substantial portion of our cash and investments to fund these
additional costs.

Our business could be adversely impacted by a failure to renew our agreements with Microsoft for source code
access.

In December 2004, we entered into a five-year technology collaboration and licensing agreement with
Microsoft Corporation, and in September 2007, we entered into a three-year source code license with Microsoft
for the general release version of Windows Server 2008. These arrangements include a technology initiative for
closer collaboration on terminal services functionality in future server operating systems, continued access to
source code for key components of Microsoft’s current server operating systems, and a patent cross-licensing
agreement. There can be no assurances that our current licenses with Microsoft will be extended or renewed by
Microsoft after their respective expirations. In addition, Microsoft could terminate the current licenses before the
expiration of the term for breach or upon a change of control. The early termination or the failure to renew
certain of our current licenses with Microsoft in a manner favorable to us could negatively impact the timing of
our release of future Application Virtualization products and enhancements.

Our investment portfolio has been subject to impairment charges due to the recent financial crisis in the
capital markets and may be adversely impacted by further deterioration of the capital markets.

Our investment portfolio as of December 31, 2008 primarily consisted of money market funds, agency
securities, corporate securities, municipal (including auction rate) securities, commercial paper and government
securities. As a result of current adverse financial market conditions, investments in some financial instruments
may pose risks arising from liquidity and credit concerns. Although we follow an established investment policy
and seek to minimize the credit risk associated with investments by investing primarily in investment grade,
highly liquid securities and by limiting exposure to any one issuer depending on credit quality, we cannot give
assurances that the assets in our investment portfolio will not lose value or become impaired.

During 2008, we recorded an unrealized loss related to our $50.0 million face value investment issued by

AIG Matched Funding Corporation, or the AIG Capped Floater. This unrealized loss was caused by the liquidity
challenges of American International Group, Inc., or AIG, which triggered a downgrade in the credit ratings for
AIG’s long-term issues to A- and A3 by two rating agencies on October 3, 2008. If AIG’s financial situation
further deteriorates, we may be required to further adjust the carrying value of the AIG Capped Floater and
record an impairment charge for an other-than-temporary decline in the fair market value of this investment.

We may be required to record additional impairment charges for other-than-temporary declines in fair
market value in our available-for-sale investments, including our investment in the AIG Capped Floater. Future
market conditions could lead to additional impairment charges, which could adversely affect our results of
operations. Moreover, fluctuations in economic and market conditions could adversely affect the market value of
our investments, and we could lose some of the principal value of our investment portfolio. A total loss of an
investment or a significant decline in the value of our investment portfolio could adversely affect our financial
condition.

18

If we lose key personnel or cannot hire enough qualified employees in certain areas of our business, our
ability to manage our business could be adversely affected.

Our success depends, in large part, upon the services of a number of key employees in certain areas of our

business. Except for certain key employees of acquired businesses, we do not have long-term employment
agreements with any of our key personnel. Any officer or employee can terminate his or her relationship with us at
any time. The effective management of our growth, if any, could depend upon our ability to retain our highly-skilled
technical, sales and services managerial, finance and marketing personnel in certain areas of our business. If any of
those employees leave, we will need to attract and retain replacements for them. We also may need to add key
personnel in the future, including in certain key areas of our business. The market for these qualified employees is
competitive. We could find it difficult to successfully attract, assimilate or retain sufficiently qualified personnel in
sufficient numbers. Furthermore, we may hire key personnel in connection with our future acquisitions; however,
any of these employees will be able to terminate his or her relationship with us at any time. If we cannot retain and
add the necessary staff and resources for these acquired businesses, our ability to develop acquired products,
markets and customers could be adversely affected. Also, we may need to hire additional personnel to develop new
products, product enhancements and technologies. If we cannot add the necessary staff and resources, our ability to
develop future enhancements and features to our existing or future products could be delayed. Any delays could
have a material adverse effect on our business, results of operations and financial condition.

If we fail to manage our operations and grow revenue, our future operating results could be adversely
affected.

Historically, the scope of our operations, the number of our employees and the geographic area of our
operations and our revenue have grown rapidly. In addition, we have acquired both domestic and international
companies. This growth and the assimilation of acquired operations and their employees could continue to place a
significant strain on our managerial, operational and financial resources. We need to continue to implement and
improve additional management and financial systems and controls. We may not be able to manage the current
scope of our operations or future growth effectively and still exploit market opportunities for our products and
services in a timely and cost-effective way. Our future operating results could also depend on our ability to manage:

•

•

•

our expanding product lines;

our marketing and sales organizations; and

our client support organization to the extent required for any increase in installations of our products.

During the past two years, a large portion of our growth has been attributable to the growth of our
Application Virtualization products, as well as growth in our Online Services and Application Networking
products. We cannot provide any assurance that these markets and the revenues we derive from these markets
will continue to grow, especially given the current adverse economic and market conditions that we face. In
addition, over the last four years we have grown our force of sales professionals that work closely with partners
to sell to primary information technology, or IT, buyers, including Strategic IT Executives, Network Architects,
IT Infrastructure Managers, Desktop Operations Managers and Server Operations Managers, to address the
multiple selling and buying opportunities presented by our expanded product lines. These and other account
penetration efforts are part of our strategy to increase the usage of our Citrix Delivery Center products within our
customer’s IT organizations. We cannot provide any assurance that this strategy will be successful or that the
release of our application delivery infrastructure products or other new products or services will sustain or
increase our revenue growth rate.

We may be unable to effectively control our operating expenses, which could negatively impact our
profitability.

Although we endeavor to effectively control our operating expenses, these expenses, which are based on
estimated revenue levels, are relatively fixed in the short term. We cannot assure you that our operating expenses
will be lower than our estimated or actual revenues in any given quarter. If we experience a shortfall in revenue

19

in any given quarter, we likely will not be able to further reduce operating expenses quickly in response. Any
significant shortfall in revenue could immediately and adversely affect our results of operations for that quarter.
Also, due to the fixed nature of many of our expenses and the challenges for revenue growth in the current
environment, our income from operations and cash flows from operating and investing activities could be lower
than in recent years.

In addition, to the extent our revenue grows, if at all, we believe that our cost of revenues and certain
operating expenses could also increase. We believe that we could incur additional costs, including royalties, as
we develop, license or buy new technologies or enhancements to our existing products and services. These added
costs and royalties could increase our cost of revenues and operating expenses and lower our gross margins.
Furthermore, we expect that our effective tax rate may increase due to the taxable income from our recent
acquisitions being earned primarily in our geographic locations that are taxed at a higher rate. However, we
cannot currently quantify the costs for such transactions that have not yet occurred or of these developing trends
in our business. In addition, we may need to use a substantial portion of our cash and investments or issue
additional shares of our common stock to fund these additional costs.

We recently implemented a restructuring program, which could have a material negative impact on our
business.

To allow us to operate more efficiently and to drive long-term changes in our cost model, at the end of
January 2009, we implemented a restructuring program and reduced our headcount by approximately 500 full-
time positions, representing approximately 10% of our global workforce. We expect to incur an aggregate pre-tax
charge in the range of approximately $19.0 million to $23.0 million related to our global workforce reduction.
We expect to record these charges primarily in the fiscal quarter ending March 31, 2009. We also expect to incur
cash and non-cash charges related to the consolidation of facilities as part of our restructuring program. Because
the details of our facilities consolidation are not yet final, we are unable at this time to estimate the amount of
cash and non-cash charges we may incur in connection with our facilities consolidation or the total amount
expected to be incurred in connection with our restructuring program. We anticipate completing the majority of
the activities related to our restructuring program by the end of 2009. We may incur additional restructuring costs
or not realize the expected benefits of these new initiatives. Further, we could experience delays, business
disruptions, unanticipated employee turnover and increased litigation related costs in connection with the
restructuring and other efficiency improvement activities, and there can be no assurance that our estimates of the
savings achievable by the restructuring will be realized. As a result, our restructuring and our related cost
reduction activities could have an adverse impact on our financial condition or results of operations.

Acquisitions present many risks, and we may not realize the financial and strategic goals we anticipate at the
time of an acquisition.

Our growth is dependent upon market growth, our ability to enhance existing products and services, and our

ability to introduce new products and services on a timely basis. We intend to continue to address the need to
develop new products and services and enhance existing products and services through acquisitions of other
companies, product lines and/or technologies. However, acquisitions, including those of high-technology
companies, are inherently risky. We cannot provide any assurance that any of our previous acquisitions,
including our acquisitions over the past three years, or future acquisitions will be successful in helping us reach
our financial and strategic goals either for that acquisition or for us generally or that the combined company
resulting from any acquisition will continue to support the growth achieved by the companies separately.

The risks we commonly encounter in managing and integrating acquisitions are:

•

•

•

difficulties and delays integrating the operations, technologies, and products of the acquired
companies;

undetected errors or unauthorized use of a third-party’s code in products of the acquired companies;

the diversion of management’s attention from normal daily operations of the business;

20

•

•

•

•

potential difficulties in completing projects associated with purchased in-process research and
development;

entry into markets in which we have no or limited direct prior experience and where competitors have
stronger market positions and which are highly competitive;

the potential loss of key employees of the acquired company; and

an uncertain sales and earnings stream from the acquired company, which could unexpectedly dilute
our earnings.

Our failure to manage growth effectively and successfully integrate acquired companies due to these or
other factors could have a material adverse effect on our business, results of operations and financial condition.

Attractive acquisition opportunities may not be available to us, which could negatively affect the growth of our
business.

Our business strategy includes the selective acquisition of businesses and technologies. In the three years
ended December 31, 2008, we completed five significant acquisitions, including the acquisition of XenSource in
2007. We plan to continue to seek opportunities to expand our product portfolio, customer base, technology, and
technical talent through acquisitions. However, we may not have the opportunity to make suitable acquisitions on
favorable terms in the future, which could negatively impact the growth of our business. We expect that other
companies in our industry will compete with us to acquire compatible businesses. This competition could
increase prices for businesses and technologies that we would likely pursue, and our competitors may have
greater resources than we do to complete these acquisitions.

If we determine that any of our goodwill or intangible assets, including technology purchased in acquisitions,
are impaired, we would be required to take a charge to earnings, which could have a material adverse effect
on our results of operations.

We have a significant amount of goodwill and other intangible assets, such as product and core technology,

related to our acquisitions. We recorded significant additional goodwill and other intangible asset amounts in
connection with the acquisition of XenSource. We do not amortize goodwill and intangible assets that are
deemed to have indefinite lives. However, we do amortize certain product related technologies, trademarks,
patents and other intangibles and we periodically evaluate them for impairment. We review goodwill for
impairment annually, or sooner if events or changes in circumstances indicate that the carrying amount could
exceed fair value, at the reporting unit level (operating segment). As of December 31, 2008, we had $904.5
million of goodwill. Fair values are based on discounted cash flows using a discount rate determined by our
management to be consistent with industry discount rates and the risks inherent in our current business model.
Due to uncertain market conditions and potential changes in our strategy and product portfolio, it is possible that
the forecasts we use to support our goodwill and other intangible assets could change in the future, which could
result in non-cash charges that would adversely affect our results of operations and financial condition.

Furthermore, impairment testing requires significant judgment, including the identification of reporting
units based on our internal reporting structure that reflects the way we manage our business and operations and to
which our goodwill and intangible assets would be assigned. Significant judgments are required to estimate the
fair value of our goodwill and intangible assets, including estimating future cash flows, determining appropriate
discount rates, estimating the applicable tax rates, foreign exchange rates and interest rates, projecting the future
industry trends and market conditions, and making other assumptions. Changes in these estimates and
assumptions, including changes in our reporting structure, could materially affect our determinations of fair
value.

We recorded approximately $515.6 million of goodwill and intangible assets in connection with our 2006

Acquisitions, our 2007 Acquisitions and our 2008 Acquisitions. If the actual revenues and operating profit
attributable to acquired intangible assets are less than the projections we used to initially value these intangible

21

assets when we acquired them, then these intangible assets may be deemed to be impaired. If we determine that
any of the goodwill or other intangible assets associated with our recent acquisitions are impaired, then we would
be required to reduce the value of those assets or to write them off completely by taking a related charge to
earnings. If we are required to write down or write off all or a portion of those assets, or if financial analysts or
investors believe we may need to take such action in the future, our stock price and operating results could be
materially adversely affected.

At December 31, 2008, we had $270.2 million, net, of unamortized intangibles, which include product

related technology we purchased in acquisitions or under third-party licenses. These intangibles are primarily
associated with our Application Networking products and Server Virtualization products. However, our channel
distributors and entities with which we have technology relationships, customers or prospective customers may
not purchase or widely accept our new products. If we fail to complete the development of our anticipated future
product and service offerings, including product offerings acquired through our acquisitions, if we fail to
complete them in a timely manner, or if we are unsuccessful in selling any new lines of products, appliances and
services, we could determine that the value of the purchased technology is impaired in whole or in part and take a
charge to earnings. We could also incur additional charges in later periods to reflect costs associated with
completing those projects that could not be completed in a timely manner. An impairment charge could have a
material adverse effect on our results of operations. If the actual revenues and operating profit attributable to
acquired product and core technologies are less than the projections we used to initially value product and core
technologies when we acquired it, such intangible assets may be deemed to be impaired. If we determine that any
of our intangible assets are impaired, we would be required to take a related charge to earnings that could have a
material adverse effect on our results of operations.

Our business could be adversely affected if we are unable to expand and diversify our distribution channels.

We currently intend to continue to expand our distribution channels by leveraging our relationships with

independent hardware and software vendors and system integrators to encourage them to recommend or
distribute our products. In addition, an integral part of our strategy is to diversify our base of channel
relationships by adding and training more channel members with abilities to reach larger enterprise customers
and to sell our newer products. This strategy will require additional resources, as we will need to expand our
internal sales and service coverage of these customers. If we fail in these efforts and cannot expand, train or
diversify our distribution channels, our business could be adversely affected. In addition to this diversification of
our base, we will need to maintain a healthy mix of channel members who cater to smaller customers. We may
need to add and remove distribution members to maintain customer satisfaction and a steady adoption rate of our
products, which could increase our operating expenses. Through our Citrix Partner Network, Citrix Authorized
Learning Centers and other programs, we are currently investing, and intend to continue to invest, significant
resources to develop these channels, which could reduce our profits.

We could change our licensing programs or subscription renewal programs, which 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 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.
Changes to our licensing programs and subscription renewal programs, including the timing of the release of
enhancements, upgrades, and maintenance releases, the term of the contract, discounts 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.

22

Sales of our Subscription Advantage product constitute substantially all of our License Updates revenue and a
large portion of our deferred revenue.

We anticipate that sales of our Subscription Advantage product will continue to constitute a substantial
portion of our License Updates revenue. Our ability to continue to generate both recognized and deferred revenue
from our Subscription Advantage product will depend on our customers continuing to perceive value in
automatic delivery of our software upgrades and enhancements. A decrease in demand for our Subscription
Advantage product could occur as a result of a decrease in demand for our Application Virtualization,
Application Networking, Server Virtualization and Application Performance Monitoring products. If our
customers do not continue to purchase our Subscription Advantage product, our License Updates revenue and
deferred revenue would decrease significantly and our results of operations and financial condition would be
adversely affected.

As our international sales and operations grow, we could become increasingly subject to additional risks that
could harm our business.

We conduct significant sales and customer support, development and engineering operations in countries

outside of the United States. During the year ended December 31, 2008, we derived approximately 45.8% of our
revenues from sales other than the United States. Our continued growth and profitability could require us to
further expand our international operations. To successfully expand international sales, we must establish
additional foreign operations, hire additional personnel and recruit additional international resellers. Our
international operations are subject to a variety of risks, which could cause fluctuations in the results of our
international operations. These risks include:

•

•

•

•

•

•

•

•

compliance with foreign regulatory and market requirements;

variability of foreign economic, political and labor conditions;

changing restrictions imposed by regulatory requirements, tariffs or other trade barriers or by U.S.
export laws;

longer accounts receivable payment cycles;

potentially adverse tax consequences;

difficulties in protecting intellectual property;

burdens of complying with a wide variety of foreign laws; and

as we generate cash flow in non-U.S. jurisdictions, if required, we may experience difficulty
transferring such funds to the U.S. in a tax efficient manner.

Our results of operations are also subject to fluctuations in foreign currency exchange rates. In order to
minimize the impact on our operating results, we generally initiate our hedging of currency exchange risks one
year in advance of anticipated foreign currency expenses. When the dollar is weak, foreign currency denominated
expenses will be higher, and these higher expenses will be partially offset by the gains realized from our hedging
contracts. If the dollar is strong, foreign currency denominated expenses will be lower. These lower expenses will
in turn be partially offset by the losses incurred from our hedging contracts. There is a risk that there will be
fluctuations in foreign currency exchange rates beyond the one year timeframe for which we hedge our risk. Due
to the generally stronger dollar in 2008 when compared to 2007, our operating expenses benefited when
converted to U.S. dollars, which was partially offset by lower gains produced by our hedging programs.

Our success depends, in part, on our ability to anticipate and address these risks. We cannot guarantee that

these or other factors will not adversely affect our business or operating results.

23

Unanticipated changes in our tax rates or our exposure to additional income tax liabilities could affect our
operating results and financial condition.

Our future effective tax rates could be favorably or unfavorably affected by unanticipated changes in the

valuation of our deferred tax assets and liabilities, the geographic mix of our revenue, or by changes in tax laws
or their interpretation. Significant judgment is required in determining our worldwide provision for income taxes.
In addition, we are subject to the continuous examination of our income tax returns by tax authorities. We
regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy
of our provision for income taxes. There can be no assurance, however, that the outcomes from these continuous
examinations will not have an adverse effect on our operating results and financial condition. Additionally, due
to the evolving nature of tax rules combined with the large number of jurisdictions in which we operate, it is
possible that our estimates of our tax liability and the realizability of our deferred tax assets could change in the
future, which may result in additional tax liabilities and adversely affect our results of operations, financial
condition and cash flows.

We have credit exposure to our hedging counterparties.

In order to minimize volatility in earnings associated with fluctuations in the value of foreign currency
relative to the U.S. dollar, we use financial instruments to hedge our exposure to foreign currencies as we deem
appropriate for a portion of our expenses which are denominated in the local currency of our foreign subsidiaries.
As a result of entering into these contracts with counterparties who are unrelated to us, the risk of a counterparty
default exists in fulfilling the hedge contract. Should there be a counterparty default, we could be exposed to the
net losses on the original hedge contracts or be unable to recover anticipated net gains from the transactions.

Our proprietary rights could offer only limited protection. Our products, including products obtained through
acquisitions, could infringe third-party intellectual property rights, which could result in material costs.

Our efforts to protect our proprietary rights may not be successful. We rely primarily on a combination of

copyright, trademark, patent and trade secret laws, confidentiality procedures and contractual provisions to
protect our proprietary rights. The loss of any material trade secret, trademark, trade name, patent or copyright
could have a material adverse effect on our business. Despite our precautions, it could be possible for
unauthorized third parties to copy or reverse engineer certain portions of our products or to otherwise obtain and
use our proprietary information. If we cannot protect our proprietary technology against unauthorized copying or
use, we may not remain competitive. Any patents owned by us could be invalidated, circumvented or challenged.
Any of our pending or future patent applications, whether or not being currently challenged, may not be issued
with the scope we seek, if at all, and if issued, may not provide any meaningful protection or competitive
advantage.

In addition, our ability to protect our proprietary rights could be affected by:

• Differences in International Law; Enforceability of Licenses: The laws of some foreign countries do

not protect our intellectual property to the same extent as do the laws of the United States and Canada.
For example, we derive a significant portion of our sales from licensing our packaged products under
“shrink wrap” or “click-to-accept” license agreements that are not signed by licensees and electronic
enterprise customer licensing arrangements that are delivered electronically, all of which could be
unenforceable under the laws of many foreign jurisdictions in which we license our products.

•

Third-Party Infringement Claims: We may become increasingly subject to infringement claims and
claims alleging the unauthorized use of a third-party’s code in our products. This may occur for a
variety of reasons, including the expansion of our product lines, such as our Application Networking
products and our Online Services division products, through product development and acquisitions,
including our acquisition of XenSource in 2007, and the increase in the number of competitors in our
industry segments and the resulting increase in the number of related products and the overlap in the
functionality of those products, and the unauthorized use of third-party’s code in our product

24

development process. Companies and inventors are more frequently seeking to patent software despite
recent developments in the law that may discourage or invalidate such patents. As a result, we could
receive more patent infringement claims. Responding to any infringement claim, regardless of its
validity, could result in costly litigation or injunctive relief or require us to obtain a license to
intellectual property rights of those third parties. Licenses may not be available on reasonable terms, on
terms compatible with the protection of our proprietary rights, or at all. In addition, attention to these
claims could divert our management’s time and attention from developing our business. If a successful
claim is made against us and we fail to develop or license a substitute technology or negotiate a
suitable settlement arrangement, our business, results of operations, financial condition and cash flows
could be materially adversely affected. See Part I, Item 3 entitled “Legal Proceedings” for information
concerning pending patent infringement cases in which we are involved.

Our use of “open source” software could negatively impact our ability to sell our products and subject us to
possible litigation.

The products or technologies acquired, licensed or developed by us may incorporate so-called “open source”

software, and we may incorporate open source software into other products in the future. Such open source
software is generally licensed by its authors or other third parties under open source licenses, including, for
example, the GNU General Public License, the GNU Lesser General Public License, “Apache-style” licenses,
“Berkeley Software Distribution,” “BSD-style” licenses, and other open source licenses. We monitor our use of
open source software in an effort to avoid subjecting our products to conditions we do not intend. Although we
believe that we have complied with our obligations under the various applicable licenses for open source
software that we use such that we have not triggered any of these conditions, there is little or no legal precedent
governing the interpretation of many of the terms of these types of licenses. As a result, the potential impact of
these terms on our business may result in unanticipated obligations regarding our products and technologies, such
as requirements that we offer our products that use the open source software for no cost, that we make available
source code for modifications or derivative works we create based upon, incorporating or using the open source
software, and/or that we license such modifications or derivative works under the terms of the particular open
source license.

If an author or other third party that distributes open source software were to allege that we had not
complied with the conditions of one or more of these licenses, we could be required to incur significant legal
expenses defending against such allegations. If our defenses were not successful, we could be subject to
significant damages, enjoined from the distribution of our products that contained the open source software, and
required to comply with the foregoing conditions, which could disrupt the distribution and sale of some of our
products. In addition, if we combine our proprietary software with open source software in a certain manner,
under some open source licenses we could be required to release the source code of our proprietary software,
which could substantially help our competitors develop products that are similar to or better than ours.

In addition to risks related to license requirements, usage of open source software can lead to greater risks

than use of third-party commercial software, as open source licensors generally do not provide warranties or
assurance of title or controls on the origin of the software.

If open source software programmers, many of whom we do not employ, do not continue to develop and
enhance the open source Xen hypervisor, we may be unable to develop new XenServer products, adequately
enhance our existing XenServer products or meet customer requirements for innovation, quality and price of
these Xen products.

We rely to a significant degree on an informal community of independent open source software

programmers to develop and enhance the Xen hypervisor. A relatively small group of software engineers, many
of whom are not employed by us, are primarily responsible for the development and evolution of the Xen
hypervisor, which is the heart of the XenServer virtualization product. If these programmers fail to adequately

25

further develop and enhance open source technologies, we would have to rely on other parties to develop and
enhance the Xen hypervisor or we would need to develop and enhance the Xen hypervisor with our own
resources. We cannot predict whether further developments and enhancements to these technologies would be
available from reliable alternative sources. In either event, our development expenses could be increased and our
product release and upgrade schedules could be delayed. Moreover, if third-party software programmers fail to
adequately further develop and enhance the Xen hypervisor, the development and adoption of this virtual server
technology could be stifled and our products, including XenServer, could become less competitive. Delays in
developing, completing or shipping new or enhanced products could result in delayed or reduced revenue for
those products and could also adversely affect customer acceptance of those offerings.

We are subject to risks associated with our strategic and technology relationships.

Our business depends on strategic and technology relationships. We cannot assure you that those

relationships will continue in the future. In addition to our relationship with Microsoft, we rely on strategic or
technology relationships with such companies as Intel Corporation, Dell Inc., Hewlett-Packard Company,
International Business Machines Corporation, SAP and others. We depend on the entities with which we have
strategic or technology relationships to successfully test our products, to incorporate our technology into their
products and to market and sell those products. We cannot assure you that we will be able to maintain our current
strategic and technology relationships or to develop additional strategic and technology relationships. If any
entities in which we have a strategic or technology relationship are unable to incorporate our technology into
their products or to market or sell those products, our business, results of operations and financial condition could
be materially adversely affected.

If we lose access to third-party licenses, releases of our products could be delayed.

We believe that we will continue to rely, in part, on third-party licenses to enhance and differentiate our

products. Third-party licensing arrangements are subject to a number of risks and uncertainties, including:

•

•

•

•

undetected errors or unauthorized use of another person’s code in the third party’s software;

disagreement over the scope of the license and other key terms, such as royalties payable;

infringement actions brought by third-party licensees; and

termination or expiration of the license.

If we lose or are unable to maintain any of these third-party licenses or are required to modify software
obtained under third-party licenses, it could delay the release of our products. Any delays could have a material
adverse effect on our business, results of operations and financial condition.

Our success depends on our ability to attract and retain and further penetrate large enterprise customers.

We must retain and continue to expand our ability to reach and penetrate large enterprise customers by

adding effective channel distributors and expanding our 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 generally have longer sales
cycles, which could negatively impact our revenues. 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 could reduce our revenues and operating profits for a given reporting period. Additionally, as
we attempt to attract and penetrate large enterprise customers, we may need to increase corporate branding and
marketing activities, which could increase our operating expenses. These efforts may not proportionally increase
our operating revenues and could reduce our profits.

26

Issues arising during the upgrade of our enterprise resource planning system could affect our operating
results and ability to manage our business effectively.

We are in the process of upgrading our SAP enterprise resource planning, or ERP, computer system to
enhance operating efficiencies and provide more effective management of our business operations. The upgrade
could cause substantial business interruption that could adversely impact our operating results.We are investing
significant financial and personnel resources into this project. However, there is no assurance that the design will
meet our current and future business needs or that it will operate as designed. We are heavily dependent on such
computer systems, and any significant failure or delay in the system upgrade, if encountered, would cause a
substantial interruption to our business and additional expense which could result in an adverse impact on our
operating results, cash flows and financial condition.

Our success may depend on our ability to attract and retain small-sized customers.

In order to successfully attract new customer segments to our XenApp products and expand our existing

relationships with enterprise customers, we must reach and retain small-sized customers and small project
initiatives within our larger enterprise customers. We cannot guarantee that our small-sized customer marketing
initiative or new product will be successful. Our failure to attract and retain small sized customers and small
project initiatives within our larger enterprise customers could have a material adverse effect on our business,
results of operations and financial condition. Additionally, as we attempt to attract and retain small sized
customers and small project initiatives within our larger enterprise customers, we may need to increase corporate
branding and broaden our marketing activities, which could increase our operating expenses. These efforts may
not proportionally increase our operating revenues and could reduce our profits.

We rely on indirect distribution channels and major distributors that we do not control.

We rely significantly on independent distributors and resellers to market and distribute our products and
appliances. For instance, one distributor, Ingram Micro, accounted for 12% of our net revenues in 2008. Our
distributor arrangements with Ingram Micro consist of several non-exclusive, independently negotiated
agreements with our subsidiaries, each of which cover different countries or regions. Moreover, no reseller
accounted for over 10% of our total net revenues in 2008. We do not control our distributors and resellers.
Additionally, our distributors and resellers are not obligated to buy our products and could also represent other
lines of products. We maintain and periodically revise our sales incentive programs for our independent
distributors and resellers, and such program revisions may adversely impact our results of operations. Some of
our distributors and resellers maintain inventories of our packaged products for resale to smaller end-users. If
distributors and resellers reduce their inventory of our packaged products, our business could be adversely
affected. Further, we could maintain individually significant accounts receivable balances with certain
distributors. The financial condition of our distributors could deteriorate and distributors could significantly delay
or default on their payment obligations. Any significant delays, defaults or terminations could have a material
adverse effect on our business, results of operations and financial condition.

For certain of our products we rely on third-party suppliers and contract manufacturers, making us
vulnerable to supply problems and price fluctuations.

We rely on a number of third-party suppliers, who provide hardware or hardware components for our
products, and contract manufacturers. For example, the production, final test, warehousing and shipping for our
Application Networking products, including our NetScaler products, Access Gateway products and Citrix
Repeater appliance products are primarily performed by a third-party contract manufacturer. We do not typically
have long-term supply agreements with our suppliers; and, in most cases, we purchase the products and
components on an as-needed purchase order basis. In some instances, such as with respect to our Application
Networking products, we maintain internal manufacturing capabilities to supplement third-party contract
manufacturers and provide us with the flexibility needed to meet our product delivery requirements on sales
orders on a limited basis. While we have not, to date, experienced any material difficulties or delays in the

27

manufacture and assembly of our products, our suppliers may encounter problems during manufacturing due to a
variety of reasons, including failure to follow specific protocols and procedures, failure to comply with
applicable regulations, equipment malfunction and environmental factors, any of which could delay or impede
their ability to meet our demand. Our reliance on these third-party suppliers and contract manufacturers subjects
us to risks that could harm our business, including:

•

•

•

our suppliers, especially new suppliers, may make errors in manufacturing components that could
negatively affect the efficacy of our products or cause delays in shipment;

our suppliers manufacture products for a range of customers, and fluctuations in demand for the
products these suppliers manufacture for others may affect their ability to deliver components and
products to us in a timely manner; and

our suppliers may encounter financial hardships unrelated to our demand for components, which could
inhibit their ability to fulfill our orders and meet our requirements.

There may be delay associated with establishing additional or replacement suppliers, particularly for
components that are available only from limited sources. Any interruption or delay in the supply of products or
components, or our inability to obtain products or components from alternate sources at acceptable prices in a
timely manner, could impair our ability to meet the demand of our customers and adversely affect our business,
financial condition or results of operations.

Our products could contain errors that could delay the release of new products and may not be detected until
after our products are shipped.

Despite significant testing by us and by current and potential customers, our products, especially new products
or releases or acquired products, could contain errors. In some cases, these errors may not be discovered until after
commercial shipments have been made. Errors in our products could delay the development or release of new
products and could adversely affect market acceptance of our products. Additionally, our products depend on third-
party products, which could contain defects and could reduce the performance of our products or render them
useless. Because our products are often used in mission-critical applications, errors in our products or the products
of third parties upon which our products rely could give rise to warranty or other claims by our customers.

We have entered into a credit facility agreement that restricts our ability to conduct our business and failure to
comply with such agreement may have an adverse effect on our business, liquidity and financial position.

We, along with our subsidiary, Citrix Systems International GmbH, maintain a credit facility agreement that

contains financial covenants tied to a maximum consolidated leverage ratio and minimum interest coverage,
among other things. The credit facility agreement also contains affirmative and negative covenants, including
limitations related to our ability to incur future indebtedness, contingent obligations or liens, conduct certain
mergers or acquisitions, make certain investments and loans, alter our capital structure, sell stock or assets and
pay dividends. If we fail to comply with these covenants or any other provision of the credit facility agreement,
we may be in default under the credit facility agreement, and we cannot assure you that we will be able to obtain
the necessary waivers or amendments of such default. Upon an event of default under our credit facility
agreement not otherwise amended or waived, the affected lenders could accelerate the repayment of any
outstanding principal and accrued interest on their outstanding loans and terminate their commitments to lend
additional funds, which may have a material adverse effect on our liquidity and financial position.

If our security measures are breached and unauthorized access is obtained to our Online Services division
customers’ data, our services may be perceived as not being secure and customers may curtail or stop using
our service.

Use of our GoToMyPC, GoToMeeting, GoToAssist or GoToWebinar services involves the storage and
transmission of customers’ business and personally identifiable information, and security breaches could expose
us to a risk of loss of this information, litigation and possible liability. If our security measures are breached as a

28

result of third-party action, employee error, malfeasance or otherwise, and, as a result, someone obtains
unauthorized access to one of our online customers’ personally identifiable data, our reputation will be damaged,
our business may suffer and we could incur significant liability. Because techniques used to obtain unauthorized
access to or sabotage systems change frequently and generally are not recognized until launched against a target,
we may be unable to anticipate these techniques or to implement adequate preventative measures. If any
compromises of security were to occur, it could have the effect of substantially reducing the use of the Web for
commerce and communications. Anyone who circumvents our security measures could misappropriate credit
card and other payment information, personally identifiable customer information or cause interruptions in our
services or operations. Fines and liabilities can be significant for breaches of payment card data. In the case of an
actual breach of payment card data, we could incur potential fines at the discretion of the credit card companies.
These fines could include penalties for all compromised account numbers, the costs of any additional fraud
detection activities required by the card associations, costs incurred by credit card issuers associated with the
compromise and additional monitoring of systems for further fraudulent activity. A large breach of payment card
data could also put our ability to process credit card payments at risk. Computer viruses, software programs that
disable or impair computers, have been and continue to be distributed and have rapidly spread over the Internet.
Computer viruses could be introduced into our systems or those of our vendors, which could disrupt our network
or make it inaccessible to our Online Services division customers. If an actual or perceived breach of our security
occurs, the market perception of the effectiveness of our security measures could be harmed and we could lose
sales and customers for our Online Services division, and in the case of an actual breach we could incur fines and
other penalties under privacy and data protection laws, which would significantly adversely affect our financial
condition and the operating results for our Online Services division.

Evolving regulation of the Web may adversely affect our Online Services division.

As Web commerce continues to evolve, increasing regulation by federal, state or foreign agencies becomes

more likely. For example, we believe increased regulation is likely in the area of laws and regulations applying to
the solicitation, collection, processing or use of personal or consumer information. Additional regulation could
impact our business through increased costs and restrictions on our ability to process and secure customer data.
In addition, taxation of services provided over the Web or other charges imposed by government agencies or by
private organizations for accessing the Web may also be imposed. Any regulation imposing greater fees for Web
use or restricting information exchange over the Web could result in a decline in the use of the Web and the
viability of Web-based services, which would significantly adversely affect our financial condition and the
operating results for our Online Services division.

Regulation of our Audio Services Group’s conferencing business may adversely affect our Online Services
division.

In October 2008, our Online Services division acquired Vapps, Inc., a VoIP-based audio services company,

to form our Audio Services Group. We anticipate that the products and services offered by the Audio Services
Group will be subject to various regulatory requirements established by the Federal Communications
Commission, or FCC. FCC regulation may delay or hinder our ability to provide our planned services and
products. The telecommunications industry is highly regulated in the U. S. at the federal, state and local levels.
Various international authorities may also seek to regulate the products and services provided or to be provided
by our Audio Services Group. The FCC and state regulatory authorities may address regulatory non-compliance
with a variety of enforcement mechanisms, including fines, refund orders, injunctive relief, license conditions,
and/or license revocation. The regulation of the telecommunications industry is changing rapidly, and the
regulatory environment varies substantially from state to state. There can be no assurance that future regulatory,
judicial or legislative activities will not have a material adverse effect on the business, and results of operations
of our Online Services division.

29

Natural disasters or other unanticipated catastrophes that result in a disruption of our operations could
negatively impact our results of operations.

Our worldwide operations are dependent on our network infrastructure, internal technology systems and

Website. Significant portions of our computer equipment, intellectual property resources and personnel,
including critical resources dedicated to research and development and administrative support functions are
presently located at our corporate headquarters in Fort Lauderdale, Florida, an area of the country that is
particularly prone to hurricanes, and at our various locations in California, an area of the country that is
particularly prone to earthquakes. We also have operations in various domestic and international locations that
expose us to additional diverse risks. The occurrence of natural disasters, such as hurricanes or earthquakes, or
other unanticipated catastrophes, such as telecommunications failures, cyber-attacks, fires or terrorist attacks, at
any of the locations in which we do business, could cause interruptions in our operations. For example,
hurricanes have passed through southern Florida causing extensive damage to the region. In addition, even in the
absence of direct damage to our operations, large disasters, terrorist attacks or other casualty events could have a
significant impact on our partners’ and customers’ businesses, which in turn could result in a negative impact on
our results of operations. Extensive or multiple disruptions in our operations, or our partners’ or customers’
businesses, due to natural disasters or other unanticipated catastrophes could have a material adverse effect on
our results of operations.

If we do not generate sufficient cash flow from operations in the future, we may not be able to fund our
product development and acquisitions and fulfill our future obligations.

Our ability to generate sufficient cash flow from operations to fund our operations and product
development, including the payment of cash consideration in acquisitions and the payment of our other
obligations, depends on a range of economic, competitive and business factors, many of which are outside our
control. We cannot assure you that our business will generate sufficient cash flow from operations, or that we
will be able to liquidate our investments, repatriate cash and investments held in our overseas subsidiaries, sell
assets or raise equity or debt financings when needed or desirable. An inability to fund our operations or fulfill
outstanding obligations could have a material adverse effect on our business, financial condition and results of
operations. For further information, please refer to “Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Liquidity and Capital Resources.”

If stock balancing returns or price adjustments exceed our reserves, our operating results could be adversely
affected.

We provide most of our distributors with stock balancing return rights, which generally permit our
distributors to return products to us by the forty-fifth day of a fiscal quarter, subject to ordering an equal dollar
amount of our products prior to the last day of the same fiscal quarter. We also provide price protection rights to
most of our distributors. Price protection rights require that we grant retroactive price adjustments for inventories
of our products held by distributors if we lower our prices for those products within a specified time period. To
cover our exposure to these product returns and price adjustments, we establish reserves based on our evaluation
of historical product trends and current marketing plans. However, we cannot assure you that our reserves will be
sufficient to cover our future product returns and price adjustments. If we inadequately forecast reserves, our
operating results could be adversely affected.

Our stock price could be volatile, particularly given the global economic downturn and volatility in domestic
and international stock markets, and you could lose the value of your investment.

Our stock price has been volatile and has fluctuated significantly in the past. The trading price of our stock

is likely to continue to be volatile and subject to fluctuations in the future. Your investment in our stock could
lose some or all of its value. Some of the factors that could significantly affect the market price of our stock
include:

•

•

actual or anticipated variations in operating and financial results;

analyst reports or recommendations;

30

•

•

changes in interest rates; and

other events or factors, many of which are beyond our control.

The stock market in general, The NASDAQ Global Select Market, and the market for software companies

and technology companies in particular, have experienced extreme price and volume fluctuations. These
fluctuations have often been unrelated or disproportionate to operating performance. These forces reached
unprecedented levels in the second half of 2008, resulting in the bankruptcy or acquisition of, or government
assistance to, several major domestic and international financial institutions and a material decline in economic
conditions. In particular, the U.S. equity markets experienced significant price and volume fluctuations that have
affected the market prices of equity securities of many technology companies. During 2008, our stock price has
experienced volatility, with the closing price of our common stock on The NASDAQ Global Select Market
having ranged from $19.54 on October 7, 2008 to $38.47 on January 3, 2008. These broad market and industry
factors could materially and adversely affect the market price of our stock, regardless of our actual operating
performance.

Changes or modifications in financial accounting standards related to business combinations may have a
material adverse impact on our reported results of operations.

In December 2007, the Financial Accounting Standards Board, or FASB, issued SFAS, No. 141R, Business

Combinations. SFAS No. 141R will require, among other things, the expensing of direct transaction costs,
including deal costs and restructuring costs as incurred and acquired in-process research and development, or
IPR&D, assets to be capitalized, certain contingent assets and liabilities to be recognized at fair value, and
arrangements related to contingent merger consideration may be required to be measured at fair value until
settled, with changes in fair value recognized each period into earnings. The adoption of SFAS No. 141R is
effective on a prospective basis for transactions occurring in 2009, and earlier adoption is not permitted.
Historically, we have been acquisitive and if we continue to be so, SFAS No 141R could have a material impact
on our consolidated financial position, results of operations and cash flows if we enter into any material business
combinations after the standard’s effective date.

Our business is subject to seasonal fluctuations.

Our business is subject to seasonal fluctuations. Historically, our net revenues have fluctuated quarterly and

have generally been the highest in the fourth quarter of our fiscal year due to corporate calendar year-end
spending trends. In addition, our European operations generally provide lower revenues in the summer months
because of the generally reduced level of economic activity in Europe during the summer. This seasonal factor
also typically results in higher fourth quarter revenues. Quarterly results are also affected by the timing of the
release of new products and services. Because of the seasonality of our business, results for any quarter,
especially our fourth quarter, are not necessarily indicative of the results that may be achieved for the full fiscal
year.

Funds from certain of our auction rate securities may not be accessible within 12 months.

As of December 31, 2008, we had an aggregate par value of $45.5 million of investments in municipal
auction rate securities whose underlying assets are generally student loans which are substantially backed by the
federal government. The market for municipal auction rate securities held in our portfolio began experiencing
auction failures on February 13, 2008, and there have been no successful auctions for the securities held in our
portfolio since the failures began. In November 2008, we formally accepted the terms of a settlement from UBS
Financial Services, Inc., or UBS. Upon accepting the terms of the settlement, we received an enforceable,
non-transferrable right, or Put Option, that would enable us to sell our auction rate securities back to UBS during
the period between June 30, 2010 and July 2, 2012 at par value. We cannot provide any assurance, however, that
UBS will have adequate financial resources to fulfill its obligation to us upon our exercise of the Put Option.

31

Based on our available cash and other investments, however, we do not currently anticipate that the lack of
liquidity caused by failed auctions related to these securities will have a material adverse effect on our operating
cash flows or will affect our ability to operate our business as usual.

ITEM 1B. UNRESOLVED STAFF COMMENTS

We have received no written comments regarding our periodic or current reports from the staff of the
Securities and Exchange Commission that were issued 180 days or more preceding the end of our 2008 fiscal
year that remain unresolved.

ITEM 2. PROPERTIES

We lease and sublease a total of 943,608 square feet of office space in the United States, Canada and Latin

America, which is comprised of 551,319 square feet related to our Americas segment and 191,433 square feet
related to our Online Services division and 200,856 square feet relating to properties surrounding our corporate
headquarters located in Fort Lauderdale, Florida. Included in this total square footage is 469,032 square feet of
office space in California, and 273,720 square feet of office space in other locations in the United States, Canada
and Latin America.

We lease and sublease a total of 465,873 square feet of office space in various other facilities outside of

North and Latin America, 232,156 of which relates to our Europe, the Middle East and Africa, or EMEA,
segment and 233,717 of which relates to our Asia-Pacific segment. In addition, we own land and buildings in the
United Kingdom with approximately 42,000 square feet of office space.

For the majority of fiscal year 2008, we also leased 281,189 square feet related to our corporate
headquarters located in Fort Lauderdale, Florida. We leased this office space pursuant to a synthetic lease
arrangement that we entered into in 2002, to lease our headquarters property under more favorable terms than
under our previous lease arrangements. Effective October 23, 2008, we exercised our option to purchase the
property. For more information see Note 10 to our consolidated financial statements included in this Annual
Report on Form 10-K for the year ended December 31, 2008.

We believe that our existing facilities are adequate for our current needs. As additional space is needed in
the future, we believe that suitable space will be available in the required locations on commercially reasonable
terms.

ITEM 3. LEGAL PROCEEDINGS

In the fourth quarter of 2008, the three previously disclosed purported shareholder derivative actions against

certain of our current and former directors and officers, and against us as a nominal defendant, alleging that
certain stock option grants made by us were dated and accounted for inappropriately, were settled and dismissed.
No defendant was required to make any monetary contribution to the settlement nor concede any wrongdoing as
part of the settlement. The settlement provided for an award of attorneys’ fees to plaintiffs’ counsel, most of
which was paid by our directors’ and officers’ liability insurer and the remainder of which was paid by us.

Due to the nature of our business, we are subject to patent infringement claims, including current suits

against us or one or more of our wholly-owned subsidiaries by Realtime Data, LLC, SSL Services, LLC,
Accolade Systems LLC, and 01 Communiqué Laboratory Inc. alleging infringement by various Citrix products
and services. These complaints were filed separately in the United States District Court for the Eastern District of
Texas in April 2008 and in January 2007, and in the United States District Court for the Northern District of Ohio
in February 2006, respectively, and seek unspecified damages and other relief. We believe that we have
meritorious defenses to the allegations made in these complaints and intend to vigorously defend these lawsuits;
however, we are unable currently to determine the ultimate outcome of these or similar matters or the potential
exposure to loss, if any.

32

In addition, we are a defendant in various litigation matters generally arising out of the normal course of

business. Although it is difficult to predict the ultimate outcome of these cases, we believe that the ultimate
outcome will not materially affect our business, financial position, results of operations or cash flows.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

33

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS

AND ISSUER PURCHASES OF EQUITY SECURITIES

Price Range of Common Stock and Dividend Policy

Our common stock is currently traded on The NASDAQ Global Select Market under the symbol “CTXS.”
The following table sets forth the high and low sales prices for our common stock as reported on The NASDAQ
Global Select Market for the periods indicated, as adjusted to the nearest cent.

Year Ended December 31, 2008:

Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31, 2007:

Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

High

Low

$27.39
$32.17
$36.20
$38.95

$43.90
$40.82
$34.86
$33.30

$19.00
$21.30
$29.15
$29.30

$35.48
$31.11
$29.93
$26.10

On February 20, 2009, the last reported sale price of our common stock on The NASDAQ Global Select
Market was $22.18 per share. As of February 20, 2009, there were approximately 1,205 holders of record of our
common stock.

We currently intend to retain any earnings for use in our business, for investment in acquisitions and to
repurchase shares of our common stock. We have not paid any cash dividends on our capital stock in the last two
years and do not currently anticipate paying any cash dividends on our capital stock in the foreseeable future.

Issuer Purchases of Equity Securities

Our Board of Directors has authorized an ongoing stock repurchase program with a total repurchase

authority granted to us of $1.8 billion. The objective of the stock repurchase program is to improve stockholders’
returns. At December 31, 2008, approximately $77.0 million was available to repurchase common stock pursuant
to the stock repurchase program. All shares repurchased are recorded as treasury stock. The following table
shows the monthly activity related to our stock repurchase program for the quarter ended December 31, 2008.

October 1, 2008 through October 31, 2008 . . . . .
November 1, 2008 through November 30,

Total Number
of Shares
Purchased (1)

Average
Price Paid
per Share

Total Number
of Shares
Purchased as Part
of Publicly
Announced Plans
or Programs

Approximate dollar
value of Shares that
may yet be
Purchased under the
Plans or Programs
(in thousands)

188,700

$23.03(2)

188,700

$104,032

2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,834,013

$26.30(2)

1,834,013

$ 80,795

December 1, 2008 through December 31,

2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

154,000

$24.54(2)

154,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,176,713

$25.89(2)

2,176,713

$ 77,016

$ 77,016

(1) Represents shares received under our prepaid stock repurchase programs and shares acquired in open market
purchases. We expended approximately $31.4 million during the quarter ended December 31, 2008 for

34

repurchases of our common stock. For more information see Note 8 to our consolidated financial statements
included in this Annual Report on Form 10-K for the year ended December 31, 2008.

(2)

These amounts represent the cumulative average of the price paid per share for shares acquired in open
market purchases and those received under our prepaid stock repurchase programs, some of which extend
over more than one fiscal period.

ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data is derived from our consolidated financial statements.
This data should be read in conjunction with the consolidated financial statements and notes thereto, and with
Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Year Ended December 31,

2008

2007

2006

2005

2004

(In thousands, except per share data)

Consolidated Statements of Income Data:
Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,583,354 $1,391,942 $1,134,319 $ 908,722 $ 741,157
26,656

Cost of net revenues(a) . . . . . . . . . . . . . . . . . .

137,607

175,132

98,698

58,099

Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:

1,408,222

1,254,335

1,035,621

850,623

714,501

. . . . . . . . . . . . . .
Research and development
Sales, marketing and services . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . .
Amortization of other intangible assets . . . . .
In-process research and development . . . . . .

288,109
669,569
256,679
22,724
1,140

205,103
590,409
229,229
17,387
9,800

155,331
480,343
178,669
16,934
1,000

108,751
394,153
125,425
11,622
7,000

86,654
337,777
105,799
6,204
19,100

Total operating expenses . . . . . . . . . . . .

1,238,221

1,051,928

832,277

646,951

555,534

Income from operations . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense, net . . . . . . . . . . . . . . . . . . . . . . . . .

Income before income taxes . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

170,001
31,506
(444)
(4,140)

196,923
18,647

202,407
49,704
(737)
(466)

250,908
36,425

203,344
41,210
(927)
(546)

243,081
60,084

203,672
23,614
(2,426)
(506)

224,354
58,745

158,967
14,274
(11,756)
2,851

164,336
33,049

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 178,276 $ 214,483 $ 182,997 $ 165,609 $ 131,287

Diluted earnings per share(b)

. . . . . . . . . . . . . . . . . $

0.96 $

1.14 $

0.97 $

0.93 $

0.75

December 31,

2008

2007

2006

2005

2004

(In thousands)

Consolidated Balance Sheet Data:
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,694,306 $2,534,693 $2,024,473 $1,698,982 $1,306,416
1,917,865
Stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . .
936,833
—
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt

1,214,528
31,000

1,464,289

1,838,325

—

—

—

(a) Cost of net revenues includes amortization of product related intangible assets of $48.0 million, $29.6

million, $19.2 million, $16.8 million, and $6.1 million in 2008, 2007, 2006, 2005 and 2004, respectively.

(b) Our diluted weighted–average shares outstanding primarily fluctuates based on the level of shares issued

under our stock-based compensation programs, stock repurchases made under our stock repurchase program
and shares issued in connection with our acquisitions. See Notes 3, 7 and 8 to our consolidated financial
statements included in this Annual Report on Form 10-K for the year ended December 31, 2008.

35

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

Overview

We design, develop and market technology solutions that allow applications to be delivered, supported, and
shared on-demand with high performance, enhanced security, and improved total cost of ownership, or TCO. We
market and license our products through multiple channels such as value-added resellers, or VARS, channel
distributors, system integrators, independent software vendors, our Websites and original equipment
manufacturers.

Executive Summary

Our solutions can fundamentally change an information technology organization’s approach and strategic

value, transforming information technology, or IT, into an on-demand service by centralizing the delivery of
applications and desktops. Further, this approach to IT transforms data centers, making them far more flexible to
adapt to the changing needs of an enterprise.

We believe Citrix’s approach is unique in the market because we have combined innovative technologies in
the areas of application virtualization, desktop virtualization, server virtualization and application networking, to
deliver the most comprehensive end-to-end application delivery solution—marketed as Citrix Delivery Center—
one that, when considered as a whole, is competitively differentiated by its interoperability and feature set.

The recent crisis in the credit markets, difficulties in the financial services sector and the overall weakness

in the global economy, is impacting IT spending. We are seeing IT projects delayed and in many cases
re-evaluated altogether. This environment could cause our current and potential customers to delay or reduce
technology purchases, which could reduce sales of our products and result in longer sales cycles, slower adoption
of new technologies and increased price competition.

At the same time, however, this environment puts a much sharper focus on IT that can reduce cost and

delivers quick, tangible return on investment, or ROI. With our customers focused on economic value in
technology solutions, we intend to highlight our solutions’ proven abilities to significantly reduce IT costs,
increase business flexibility, and deliver ROI

XenApp and XenDesktop, for example, can reduce the cost of traditional desktop management by

virtualizing the desktop and applications in the datacenter, where they are more easily and efficiently maintained
and altered. XenServer and NetScaler can alter the traditional economies of the data center by providing much
greater levels of flexibility of computing resources, especially servers, by improving application performance,
thus reducing the amount of processing power involved, and allowing easy reconfiguration of servers to use for
multiple purposes.

Further, we will endeavor to sustain the long-term growth of our businesses and enhance our current

solution set through technological innovation, engineering excellence, selective and strategic acquisition of
technology, talent and/or companies, and a commitment to delivering high-quality products and services to
customers and partners. We expect to continue to make strategic investments in research and development of
existing and new products and we will also invest in research and development of advanced technologies for
future application, including server and desktop delivery infrastructure products. We believe that delivering
innovative and high-value solutions through Citrix Delivery Center is the key to meeting customer and partner
needs and achieving our future growth.

Further, from an operations standpoint, in order to operate more efficiently and to drive long-term changes
in our cost model, on January 28, 2009, we announced the implementation of a strategic restructuring program,
or the Strategic Restructuring Program. The Strategic Restructuring Program includes steps to reduce our

36

headcount by approximately 500 full-time positions, representing approximately 10% of our global workforce, or
the Global Workforce Reduction. In addition, we are postponing merit increases that would normally occur in the
second quarter of 2009 until the fourth quarter of 2009, and the 2009 merit increases for all vice presidents and
company officers have been eliminated. In the first quarter of 2009, we expect to incur a pre-tax charge in the
range of approximately $19 million to $23 million primarily related to our Global Workforce Reduction. In
addition, the Global Workforce Reduction is expected to result in an annualized pre-tax savings of approximately
$50.0 million. Also, as part of the Strategic Restructuring Program, we are in the process of assessing the
consolidation of facilities and roles across all groups and geographies to reduce redundancy and increase
standardization. In addition, we are taking further steps to reduce operating costs that include reprioritizing
internal projects, reducing contract workers and limiting travel spending.

Summary of Results

For the year ended December 31, 2008 compared to the year ended December 31, 2007, we delivered the

following financial performance:

•

Product License revenue increased 7.5% to $620.2 million;

• License Updates revenue increased 15.4% to $559.3 million;

• Online Services revenue increased 21.7% to $260.1 million;

• Technical Services revenue increased 23.5% to $143.7 million;

• Operating income decreased 16.0% to $170.0 million; and

• Diluted earnings per share decreased 16.6% to $0.96.

The increase in our Product License revenue was primarily driven by increased sales across all of our
product groupings. We currently expect Product License sales to decrease when comparing the first quarter of
2009 to the first quarter of 2008 primarily due to anticipated continued weakness in the global economy and its
anticipated impact on our customers IT spending, as described above. The increase in License Updates revenue
was driven by increased renewals of our Subscription Advantage product over a larger subscriber base and to a
lesser extent an increase in Subscription Advantage associated with new product licenses. Our Online Services
revenue increased due to continued sales strength of our real-time collaboration services and to a lesser extent
our Web-based access products. We currently expect our Online Services revenue to increase slightly when
comparing the first quarter of 2009 to the fourth quarter of 2008; however, we anticipate the overall rate of
growth for this group to be slower than experienced in 2008. The decrease in operating income is primarily due
to increases in stock-based compensation expense primarily related to stock-based awards assumed in
conjunction with our XenSource Acquisition.

In addition, the recent financial crisis in the credit markets has caused some of our investments to
experience other-than-temporary declines in fair value, which have resulted in impairment charges and
unrealized losses in our investment portfolio. We do not currently anticipate that the lack of liquidity caused by
holding these investments will have a material adverse effect on our operating cashflows or financial position.
We continue to monitor our overall investment portfolio and if the credit ratings of the issuers of our investments
deteriorate or if the issuers experience financial difficulty, including bankruptcy, we may be required to make
additional adjustments to the carrying value of the securities in our investment portfolio and recognize additional
impairment charges for declines in fair value which are determined to be other-than-temporary. See “– Liquidity
and Capital Resources” below.

2008 Acquisition

In October 2008, we acquired all of the issued and outstanding securities of Vapps, Inc., or Vapps, a
privately held Delaware corporation headquartered in Hoboken, New Jersey. Vapps offers high quality audio
conferencing solutions to small and medium sized businesses and enterprise and service provider markets that

37

complement our online services products. The total consideration for this transaction was approximately $26.4
million in cash, including $1.0 million in transaction costs. In addition, if certain financial and operational
milestones are achieved by the Vapps business, contingent consideration of up to approximately $4.4 million
may be earned. The sources of funds for this transaction consisted of available cash and investments. In addition,
we assumed approximately 0.1 million unvested stock options upon the closing of the transaction.

Revenues from Vapps are included in our Online Services revenue. The Vapps results of operations have

been included in our consolidated results of operations beginning after the date of its acquisition and are not
significant in relation to our consolidated financial statements.

Under the purchase method of accounting, the purchase price for Vapps was allocated to the acquired
company’s net tangible and intangible assets based on their estimated fair values as of the date of the acquisition.
The allocation of the total purchase price is summarized below (in thousands):

Purchase Price
Allocation

Asset
Life

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In-process research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

744
709
420
1,140
10,750
19,971

33,734
(3,175)
(4,201)

Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$26,358

Various

3-8 years
Indefinite

Current assets acquired and current liabilities assumed in connection with Vapps consisted mainly of
accounts receivable and other accrued expenses. Other assets and non-current liabilities consisted primarily of
deferred taxes. The $20.0 million of goodwill related to Vapps was assigned to our Online Services segment and
is not deductible for tax purposes. See Note 12 to our consolidated financial statements included in this Annual
Report on Form 10-K for the year ended December 31, 2008 for segment information.

2007 Acquisitions

During 2007, we acquired all of the issued and outstanding capital stock of two privately held companies,
Ardence Delaware Inc., a leading provider of solutions that allow information technology administrators to set up
and configure PCs, servers, and Web servers in real time from a centrally managed source, and XenSource, Inc.,
a privately held leader in enterprise-grade virtual infrastructure solutions, collectively the 2007 Acquisitions. The
2007 Acquisitions positioned us in adjacent server and desktop virtualization markets that will allow us to
continue to extend our leadership in the broader Application Delivery Infrastructure market. The total
consideration for the 2007 Acquisitions was approximately $379.4 million, comprised of approximately
7.1 million shares of our common stock valued at $232.3 million, $142.8 million in cash and approximately $4.3
million in direct transaction costs. In addition, in connection with the 2007 Acquisitions, we issued
approximately 1.3 million unvested shares of our common stock, 0.1 million non-vested stock units and assumed
approximately 3.4 million stock options each of which will be exercisable for the right to receive one share of our
common stock upon vesting. Revenues from the products acquired in the 2007 Acquisitions are primarily
included in our Product License revenue. The 2007 Acquisitions’ results of operations have been included in our
consolidated results of operations beginning after the date of each of the acquisitions. The source of funds for the
cash consideration paid in these transactions consisted of available cash and investments. In connection with the
2007 Acquisitions, we allocated $251.6 million to goodwill, $112.3 million to product related intangible assets
and $56.3 million to other intangible assets.

38

2006 Acquisitions

During 2006, we acquired all of the issued and outstanding capital stock of two privately held companies,

Reflectent Software, Inc., a provider of solutions to monitor the real-time performance of client-server, Web and
desktop applications from an end-user perspective, and Orbital Data Corporation, a provider of solutions that
optimize the delivery of applications over wide area networks, collectively the 2006 Acquisitions. The total
consideration for the 2006 Acquisitions was $68.0 million comprised of cash paid of $65.1 million and other
costs related primarily to direct transaction costs of $2.9 million, including approximately $0.3 million related to
stock-based awards that were granted and vested upon consummation of the acquisitions. As part of the 2006
Acquisitions, we assumed approximately 0.4 million non-vested stock-based awards upon the closing of the
transaction. Revenues from the acquired products are primarily included in our Product License revenue and
Technical Services revenue. The sources of funds for consideration paid in these transactions consisted of
available cash and investments. In connection with the 2006 Acquisitions, we allocated $43.7 million to
goodwill, $17.3 million to product related technology and $3.6 million to other intangible assets.

In-process Research and Development for Acquisitions

The fair values used in determining the purchase price allocation for certain intangible assets for our
acquisitions were based on estimated discounted future cash flows, royalty rates and historical data, among other
information. Purchased in-process research and development, or IPR&D, was expensed immediately upon the
closing of our 2008 acquisition of Vapps in the amount of $1.1 million, our 2007 Acquisitions in the amount of
$9.8 million and our 2006 Acquisitions in the amount of $1.0 million. Such IPR&D was expensed in accordance
with FASB Interpretation No. 4, Applicability of FASB Statement No. 2 to Business Combinations Accounted for
by the Purchase Method, due to the fact that it pertained to technology that was not currently technologically
feasible, meaning it had not reached the working model stage, did not contain all of the major functions planned
for the product, was not ready for initial customer testing and had no alternative future use. The fair value
assigned to in-process research and development was determined using the income approach, which includes
estimating the revenue and expenses associated with a project’s sales cycle and by estimating the amount of
after-tax cash flows attributable to the projects. The future cash flows were discounted to present value utilizing
an appropriate risk-adjusted rate of return, which ranged from 20%–36%. The rate of return included a factor that
takes into account the uncertainty surrounding the successful development of the IPR&D.

Critical Accounting Policies and Estimates

Our discussion and analysis of financial condition and results of operations are based upon our consolidated

financial statements, which have been prepared in accordance with accounting principles generally accepted in
the United States. The preparation of these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent
liabilities. We base these estimates on our historical experience and on various other assumptions that we believe
to be reasonable under the circumstances, and these estimates form the basis for our judgments concerning the
carrying values of assets and liabilities that are not readily apparent from other sources. We periodically evaluate
these estimates and judgments based on available information and experience. Actual results could differ from
our estimates under different assumptions and conditions. If actual results significantly differ from our estimates,
our financial condition and results of operations could be materially impacted.

We believe that the accounting policies described below are critical to understanding our business, results of

operations and financial condition because they involve more significant judgments and estimates used in the
preparation of our consolidated financial statements. An accounting policy is deemed to be critical if it requires
an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the
estimate is made, and if different estimates that could have been used, or changes in the accounting estimates that
are reasonably likely to occur periodically, could materially impact our consolidated financial statements. We
have discussed the development, selection and application of our critical accounting policies with the Audit

39

Committee of our Board of Directors and our independent auditors, and our Audit Committee has reviewed our
disclosure relating to our critical accounting policies and estimates in this “Management’s Discussion and
Analysis of Financial Condition and Results of Operations.”

Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K for the year
ended December 31, 2008 describes the significant accounting policies and methods used in the preparation of
our Consolidated Financial Statements.

Revenue Recognition

The accounting related to revenue recognition in the software industry is complex and affected by

interpretations of the rules and an understanding of industry practices, both of which are subject to change. As a
result, revenue recognition accounting rules require us to make significant judgments. In addition, our judgment
is required in assessing the probability of collection, which is generally based on evaluation of customer-specific
information, historical collection experience and economic market conditions. If market conditions continue to
decline, or if the financial condition of our distributors or customers deteriorate, we may be unable to determine
that collectability is probable, and we could be required to defer the recognition of revenue until we receive
customer payments.

We license most of our products bundled with a one year contract for license updates that provide the
end-user with free enhancements and unspecified upgrades to the licensed product on a when and if available
basis. Customers may also elect to purchase subscriptions for license updates, when not bundled with the initial
product license. Customers may also elect to purchase technical support, product training or consulting services.
We allocate revenue to license updates and any other undelivered elements of the arrangement based on vendor
specific objective evidence, or VSOE, of fair value of each element and such amounts are deferred until the
applicable delivery criteria and other revenue recognition criteria have been met. The balance of the revenue, net
of any discounts inherent in the arrangement, is recognized at the outset of the arrangement using the residual
method as the product licenses are delivered. If we cannot objectively determine the fair value of each
undelivered element based on the VSOE of fair value, we defer revenue recognition until all elements are
delivered, all services have been performed, or until fair value can be objectively determined. We must apply
judgment in determining all elements of the arrangement and in determining the VSOE of fair value for each
element, considering the price charged for each product on a stand-alone basis or applicable renewal rates for
subscriptions related to new products.

In the normal course of business, we are not obligated to accept product returns from our distributors under

any conditions, unless the product item is defective in manufacture, but we do provide most of our distributors
with stock balancing and price protection rights. Stock balancing rights permit distributors to return products to
us up to the forty-fifth day of the fiscal quarter, subject to ordering an equal dollar amount of our other products
prior to the last day of the same fiscal quarter. Price protection rights require that we grant retroactive price
adjustments for inventories of our products held by distributors or resellers if we lower our prices for such
products. Product items returned to us under the stock balancing program must be in new, unused and unopened
condition. We establish provisions for estimated returns for stock balancing and price protection rights, as well as
other sales allowances, concurrently with the recognition of revenue. The provisions are established based upon
consideration of a variety of factors, including, among other things, recent and historical return rates for both,
specific products and distributors, estimated distributor inventory levels by product, the impact of any new
product releases and projected economic conditions. Actual product returns for stock balancing and price
protection provisions incurred are, however, dependent upon future events, including the amount of stock
balancing activity by our distributors and the level of distributor inventories at the time of any price adjustments.
We continually monitor the factors that influence the pricing of our products and distributor inventory levels and
make adjustments to these provisions when we believe actual returns and other allowances could differ from
established reserves. Our ability to recognize revenue upon shipment to our distributors is predicated on our
ability to reliably estimate future stock balancing returns. If actual experience or changes in market condition

40

impairs our ability to estimate returns, we would be required to defer the recognition of revenue until the delivery
of the product to the end-user. Allowances for estimated product returns amounted to approximately $1.6 million
and $1.7 million at December 31, 2008 and 2007, respectively. We have not reduced and have no current plans to
reduce our prices for inventory currently held by distributors or resellers. Accordingly, there were no reserves
required for price protection at December 31, 2008 and December 31, 2007. We also record reductions to
revenue for customer programs and incentive offerings including volume-based incentives, at the time the sale is
recorded. We could take actions to increase our customer incentive offerings, which could result in an
incremental reduction to our revenue at the time the incentive is offered.

Stock-Based Compensation

We adopted the provisions of Statement of Financial Accounting Standards, or SFAS, No. 123R, Share-
Based Payment on January 1, 2006. Under the fair value recognition provisions of SFAS No. 123R, stock-based
compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense
over the requisite service or performance period, which is the vesting period. We currently use the Black-Scholes
option pricing model to determine the fair value of stock options. The determination of the fair value of stock-
based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as
assumptions regarding a number of complex and subjective variables. These variables include our expected stock
price volatility over the term of the awards, the expected term of the award, the risk-free interest rate and any
expected dividends.

For purposes of determining the expected volatility factor, we used the implied volatility in two-year
market-traded options on our common stock based on third party volatility quotes in accordance with the
provisions of Staff Accounting Bulletin, or SAB, No. 107. Our decision to use implied volatility was based upon
the availability of actively traded options on our common stock and our assessment that implied volatility is more
representative of future stock price trends than historical volatility. The expected term of our options is based on
historical employee exercise patterns. We also analyzed our historical pattern of option exercises based on certain
demographic characteristics and we determined that there were no meaningful differences in option exercise
activity based on demographic characteristics. The approximate risk free interest rate is based on the implied
yield available on U.S. Treasury zero-coupon issues with remaining terms equivalent to the expected term on our
options. We do not intend to pay dividends on our common stock in the foreseeable future and, accordingly, we
used a dividend yield of zero in the option pricing model. We are required to estimate forfeitures at the time of
grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. We use
historical data to estimate pre-vesting option forfeitures and record stock-based compensation expense only for
those awards that are expected to vest. All stock-based payment awards that vest based on service, including
those with graded vesting schedules, are amortized on a straight-line basis over the requisite service periods of
the awards, which are generally the vesting periods. Beginning in 2006, we began issuing non-vested stock units
and non-vested stock with performance goals to certain senior members of management. The number of
non-vested stock units or non-vested stock underlying each award may be determined based on a range of
attainment within defined performance goals. We are required to estimate the attainment that will be achieved
related to the defined performance goals and number of non-vested stock units or non-vested stock that will
ultimately be awarded in order to recognize compensation expense over the vesting period. If our initial estimates
of performance goal attainment change, the related expense may fluctuate from quarter to quarter based on those
estimates and if the performance goals are not met, no compensation cost will be recognized and any previously
recognized compensation cost will be reversed. As of December 31, 2008, there was $161.6 million of total
unrecognized compensation cost related to options, non-vested stock and non-vested stock units. That cost is
expected to be recognized over a weighted-average period of 1.97 years.

If factors change and we employ different assumptions for estimating stock-based compensation expense in

future periods or if we decide to use a different valuation model, the stock-based compensation expense we
recognize in future periods may differ significantly from what we have recorded in the current period and could
materially affect our operating income, net income and earnings per share. This may result in a lack of

41

consistency in future periods and materially affect the fair value estimate of stock-based payments. It may also
result in a lack of comparability with other companies that use different models, methods and assumptions. The
Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that
have no vesting restrictions and are fully transferable. These characteristics are not present in our option grants.
Existing valuation models, including the Black-Scholes and lattice binomial models, may not provide reliable
measures of the fair values of our stock-based compensation. Consequently, there is a risk that our estimates of
the fair values of our stock-based compensation awards on the grant dates may bear little resemblance to the
actual values realized upon the exercise, expiration, early termination or forfeiture of those stock-based payments
in the future. Certain stock-based payments, such as employee stock options, may expire with little or no intrinsic
value compared to the fair values originally estimated on the grant date and reported in our financial statements.
Alternatively, the value realized from these instruments may be significantly higher than the fair values originally
estimated on the grant date and reported in our financial statements. There is currently no market-based
mechanism or other practical application to verify the reliability and accuracy of the estimates stemming from
these valuation models, nor is there a means to compare and adjust the estimates to actual values. See Notes 2
and 7 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended
December 31, 2008 for further information regarding our adoption of SFAS No. 123R.

Valuation and Classification of Investments

Effective January 1, 2008, we adopted the provisions of SFAS No. 157, Fair Value Measurements, or SFAS

No. 157. Under this standard, fair value is defined as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date (an exit price).
Our investments are carried at fair value and in determining their fair value we are sometimes required to use
various valuation techniques. SFAS No. 157 establishes a hierarchy for inputs used in measuring fair value that
maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most
observable inputs be used when available.

SFAS No. 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring

fair value as follows: The fair value hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities, described as Level 1, and the lowest priority to valuation techniques
using unobservable inputs, described as Level 3. Observable inputs are those that market participants would use
in pricing the asset or liability that are based on market data obtained from independent sources, such as market
quoted prices. When Level 1 observable inputs for our investments are not available to determine their fair value,
we must then use other inputs which may include indicative pricing for securities from the same issuer with
similar terms or unobservable inputs that reflect our estimates of the assumptions market participants would use
in pricing the investments based on the best information available in the circumstances. When valuation
techniques, other than those described as Level 1 are utilized, management must make estimations and judgments
in determining the fair value for its investments. The degree to which management’s estimation and judgment is
required is generally dependent upon the market pricing available for the investments, the availability of
observable inputs, the frequency of trading in the investments and the investment’s complexity. If we make
different judgments regarding unobservable inputs we could potentially reach different conclusions regarding the
fair value of our investments.

After we have determined the fair value of our investments, for those that are in an unrealized loss position,

we must then determine if the investment is other-than-temporarily impaired. We review our investments
quarterly for indicators of other-than-temporary impairment. This determination requires significant judgment
and if different judgments are used the classification of the losses related to our investments could differ. In
making this judgment, we employ a systematic methodology that considers available quantitative and qualitative
evidence in evaluating potential impairment of our investments. If the cost of an investment exceeds its fair
value, we evaluate, among other factors, general market conditions, the duration and extent to which the fair
value is less than cost, and our intent and ability to hold the investment until it recovers. We also consider
specific adverse conditions related to the financial health of and business outlook for the investee, including

42

industry and sector performance, rating agency actions, changes in credit default swap levels, changes in
technology and operational and financing cash flow factors, and. Once a decline in fair value is determined to be
other-than-temporary, an impairment charge is recorded and a new cost basis in the investment is established.
See Notes 4 and 5 to our consolidated financial statements and “Liquidity and Capital Resources” for more
information on our investments and fair value measurements.

Product Related Technology Assets

We have acquired our product related technology assets from our business combinations and other third

party agreements. In applying purchase accounting, we allocate a portion of purchase price of acquired
companies to the product related technology assets acquired based on their estimated fair values. We typically
engage third party appraisal firms to assist us in determining the fair values and useful lives of product related
technology assets acquired. Such valuations and useful life determinations require us to make significant
estimates and assumptions. These estimates are based on historical experience and information obtained from the
management of the acquired companies and are inherently uncertain. Critical estimates in determining the fair
value and useful lives of the product related technology assets include but are not limited to future expected cash
flows earned from the product related technology and discount rates applied in determining the present value of
those cash flows. Unanticipated events and circumstances may occur which may affect the accuracy or validity of
such assumptions, estimates or actual results.

We review acquired product related technology assets for impairment on a periodic basis by comparing the
estimated net realizable value to the unamortized cost of the technology. The recoverability of these technologies
is primarily dependent upon our ability to commercialize products utilizing these technologies. The estimated net
realizable value of the purchased technology is based on the estimated undiscounted future cash flows derived
from such technology. Our assumptions about future revenues and expenses require significant judgment
associated with the forecast of the performance of our products. Actual revenues and costs could vary
significantly from these forecasted amounts. As of December 31, 2008, the estimated undiscounted future cash
flows expected from product related technology assets from these acquisitions is sufficient to recover their
carrying value. If these products are not ultimately accepted by our customers and distributors, and there is no
alternative future use for the technology, we could determine that some or all of their remaining $185.7 million
carrying value is impaired. In the event of impairment, we would record an impairment charge to earnings that
could have a material adverse effect on our results of operations.

Goodwill

At December 31, 2008, we had $904.5 million in goodwill related to our acquisitions. The goodwill

recorded in relation to these acquisitions is not deductible for tax purposes. We operate in a single industry
segment consisting of the design, development and marketing of technology solutions that deliver applications
on-demand. Our revenues are derived from sales of our Citrix Delivery Center products and related technical
services in the Americas, EMEA, and Asia-Pacific regions and from online services sold by our Online Services
division. These three geographic regions and the Online Services division constitute our reportable segments. See
Note 12 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended
December 31, 2008 for additional information regarding our reportable segments. We evaluate goodwill among
these segments, which represent our reporting units. Excluding goodwill, we have no intangible assets deemed to
have indefinite lives.

We use judgment in assessing goodwill for impairment. Goodwill is reviewed for impairment annually, or

sooner if events or changes in circumstances indicate that the carrying amount could exceed fair value. Fair
values are based on discounted cash flows using a discount rate determined by our management to be consistent
with industry discount rates and the risks inherent in our current business model. In accordance with SFAS
No. 142, Goodwill and Other Intangible Assets, we completed the required annual impairment tests of goodwill
as of December 31, 2008. There were no impairment charges recorded as a result of our annual impairment tests.

43

Due to uncertain market conditions and potential changes in our strategy, product portfolio or reportable
segments, it is possible that the forecasts we use to support our goodwill could change in the future, which could
result in non-cash charges that would adversely affect our results of operations and financial condition.

Income Taxes

We are required to estimate our income taxes in each of the jurisdictions in which we operate as part of the
process of preparing our consolidated financial statements. At December 31, 2008, we had approximately $64.9
million in deferred tax assets. SFAS No. 109, Accounting for Income Taxes, requires a valuation allowance to
reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some
portion or all of the deferred tax assets will not be realized. We review deferred tax assets periodically for
recoverability and make estimates and judgments regarding the expected geographic sources of taxable income
and gains from investments, as well as tax planning strategies in assessing the need for a valuation allowance. At
December 31, 2008, we determined that a $14.2 million valuation allowance relating to deferred tax assets for net
operating losses from acquired companies and unrealized losses from temporary impairments on
available-for-sale investments was necessary. If the estimates and assumptions used in our determination change
in the future, we could be required to revise our estimates of the valuation allowances against our deferred tax
assets and adjust our provisions for additional income taxes.

In the ordinary course of global business, there are transactions for which the ultimate tax outcome is
uncertain, thus judgment is required in determining the worldwide provision for income taxes. We provide for
income taxes on transactions based on our estimate of the probable liability. We adjust our provision as
appropriate for changes that impact our underlying judgments. Changes that impact provision estimates include
such items as jurisdictional interpretations on tax filing positions based on the results of tax audits and general
tax authority rulings. Due to the evolving nature of tax rules combined with the large number of jurisdictions in
which we operate, it is possible that our estimates of our tax liability and the realizability of our deferred tax
assets could change in the future, which may result in additional tax liabilities and adversely affect our results of
operations, financial condition and cash flows.

The following discussion relating to the individual financial statement captions, our overall financial

performance, operations and financial position should be read in conjunction with the factors and events
described in “—Overview” and Part 1—Item 1A entitled “Risk Factors,” which could impact our future
performance and financial position.

Stock Option Investigation

On November 30, 2006, our Audit Committee commenced a voluntary, independent investigation of our
historical stock option granting practices and related accounting, or the Stock Option Investigation, during the
period from January 1996 through December 2006. Our Annual Report on Form 10-K for the year ended
December 31, 2006, which was filed on September 7, 2007, contains a description of the Audit Committee’s
investigation, management’s related review, the conclusions of the Audit Committee and management. See also
“— Results of Operations.”

Results of Operations

Our operations consist of the design, development and marketing of technology solutions that deliver

applications on-demand with high performance, enhanced security and improved total cost of ownership, or
TCO. We market and license our products through multiple channels such as value added resellers, channel
distributors, system integrators, independent software vendors, our Websites and original equipment
manufacturers.

44

The following table sets forth our consolidated statements of income data and presentation of that data as a

percentage of change from year-to-year.

Year Ended December 31,

2008

2007
(In thousands)

2006

2008
Compared to
2007

2007
Compared to
2006

Revenues:

Product licenses . . . . . . . . . . . . . . . . . . .
License updates . . . . . . . . . . . . . . . . . . .
Online services . . . . . . . . . . . . . . . . . . .
Technical services . . . . . . . . . . . . . . . . .

$ 620,215
559,340
260,065
143,734

$ 577,144
484,669
213,744
116,385

$ 488,487
405,756
148,795
91,281

Total net revenues . . . . . . . . . . . . . . . . . . . . .
Cost of net revenues:

Cost of product license revenues . . . . . .
Cost of services revenues . . . . . . . . . . .
Amortization of product related

1,583,354

1,391,942

1,134,319

47,801
79,303

42,984
65,027

intangible assets . . . . . . . . . . . . . . . .

48,028

29,596

Total cost of net revenues . . . . . . .

175,132

137,607

32,911
46,585

19,202

98,698

Gross margin . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:

Research and development . . . . . . . . . .
Sales, marketing and services . . . . . . . .
General and administrative . . . . . . . . . .
Amortization of other intangible

1,408,222

1,254,335

1,035,621

288,109
669,569
256,679

205,103
590,409
229,229

155,331
480,343
178,669

assets . . . . . . . . . . . . . . . . . . . . . . . . .

22,724

17,387

16,934

In-process research and

development

. . . . . . . . . . . . . . . . . . .

1,140

9,800

1,000

Total operating expenses . . . . . . . .

1,238,221

1,051,928

832,277

Income from operations . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . .
Other expense, net . . . . . . . . . . . . . . . . . . . . .

Income before income taxes . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . .

170,001
31,506
(444)
(4,140)

196,923
18,647

202,407
49,704
(737)
(466)

250,908
36,425

203,344
41,210
(927)
(546)

243,081
60,084

Net income . . . . . . . . . . . . . . . . . .

$ 178,276

$ 214,483

$ 182,997

* not meaningful.

Revenues

7.5%
15.4
21.7
23.5

13.8

18.1%
19.4
43.6
27.5

22.7

11.2
22.0

62.3

27.3

12.3

40.5
13.4
12.0

30.7

(88.4)

17.7

(16.0)
(36.6)
(39.8)
*

(21.5)
(48.8)

(16.9)

30.6
39.6

54.1

39.4

21.1

32.0
22.9
28.3

2.7

*

26.4

(0.5)
20.6
(20.5)
(14.7)

3.2
(39.4)

17.2

Net revenues include the following categories: Product Licenses, License Updates, Online Services and
Technical Services. Product Licenses primarily represent fees related to the licensing of the following major
products:

• Our Application Virtualization products, including XenApp;

• Our Application Networking products, including NetScaler, Citrix Repeater and Access Gateway;

• Our Desktop Virtualization product, including XenDesktop; and

• Our Server Virtualization product, including XenServer.

45

In addition, we offer incentive programs to our channel distributors and VARs to stimulate demand for our

products. Revenues associated with these programs are partially offset by these incentives to our channel
distributors and VARs.

License Updates consist of fees related to our Subscription Advantage program that are recognized ratably

over the term of the contract, which is typically 12 to 24 months. Subscription Advantage is an annual renewable
program that provides subscribers with automatic delivery of unspecified software upgrades, enhancements and
maintenance releases when and if they become available during the term of the subscription. Online Services
revenues consist primarily of fees related to online service agreements and are recognized ratably over the contract
term. Technical Services revenues are comprised of fees from technical support services which are recognized
ratably over the contract term, as well as revenues from product training and certification, and consulting services
revenue related to implementation of our products, which is recognized as the services are provided.

Year Ended December 31,

2008

2007

2006

2008
Compared to
2007

2007
Compared to
2006

(In thousands)

Revenues:

Product licenses . . . . . . . . . . . . . . . . . . .
License updates . . . . . . . . . . . . . . . . . . .
Online services . . . . . . . . . . . . . . . . . . .
Technical services . . . . . . . . . . . . . . . . .

$ 620,215
559,340
260,065
143,734

$ 577,144
484,669
213,744
116,385

$ 488,487
405,756
148,795
91,281

$ 43,071
74,671
46,321
27,349

$ 88,657
78,913
64,949
25,104

Total net revenues . . . . . . . . . . . . .

$1,583,354

$1,391,942

$1,134,319

$191,412

$257,623

Product Licenses

Product License revenue increased during 2008 when compared to 2007 primarily due to increased sales of

our Application Networking products, sales of our newer products including our Server and Desktop
Virtualization products and to a lesser extent, our Application Virtualization products. Product License revenue
increased during 2007 when compared to 2006 primarily due to increased sales of our Application Virtualization
and Application Networking products and, to a lesser extent due to sales of our products acquired in 2007. We
currently expect Product License sales to decrease when comparing the first quarter of 2009 to the first quarter of
2008 primarily due to anticipated continued weakness in the global economy and its anticipated impact on the IT
spending of our customers.

License Updates

License Updates revenue increased during 2008 when compared to 2007 primarily due to increasing
renewals related to our Subscription Advantage program over a larger base of subscribers and to a lesser extent
an increase in new Subscription Advantage licenses. License update revenue increased during 2007 when
compared to 2006 primarily due to a larger base of subscribers and increasing renewals related to our
Subscription Advantage program. We currently anticipate that License Updates revenue will increase when
comparing the first quarter of 2009 to the fourth quarter of 2008 due primarily to renewals over our installed
customer base; however, these increases will be at a slower rate than experienced in 2008.

Online Services

Online Services revenue increased during 2008 when compared to 2007 primarily due to increased sales of

our real-time application collaboration services and, to a lesser extent our Web-based access services. Online
Services revenue increased during 2007 when compared to 2006 primarily due to increased sales of our real time
application collaboration services. We currently expect our Online Services revenue to increase slightly when
comparing the first quarter of 2009 to the fourth quarter of 2008; however, we anticipate the overall rate of
growth for this group to be slower than experienced in 2008.

46

Technical Services

Technical Services revenue increased during 2008 when compared to 2007 primarily due to increased sales
of support services related to our Application Networking products and to a lesser extent an increase in sales of
support and consulting related to the implementation of our Application Virtualization products. Technical
Services revenue increased during 2007 when compared to 2006 primarily due to increased sales of support
services related to our Application Networking products and to a lesser extent an increase in sales of support and
services related to the implementation of our Application Virtualization products. We currently expect Technical
Services sales to decrease when comparing the first quarter of 2009 to the first quarter of 2008 consistent with
the decrease in Product License revenue described above.

Deferred Revenue

Deferred revenues are primarily comprised of License Updates revenue from our Subscription Advantage
product, Online Services revenues from annual service agreements for our online services products and Technical
Services revenues related to our support services and consulting contracts. Deferred revenues increased
approximately $90.8 million as of December 31, 2008 compared to December 31, 2007 primarily due to
increased renewals of our Subscription Advantage product, increased sales of services related to our Application
Networking products and increased sales of our online service agreements. We currently expect deferred revenue
to continue to increase in 2009 although at a slower rate when compared to 2008.

We do not believe that backlog, as of any particular date, is a reliable indicator of future performance. While

it is generally our practice to promptly ship our products upon receipt of properly finalized purchase orders, we
sometimes have product license orders that have not shipped. Although the amount of such product license orders
may vary, the amount, if any, of such product license orders at the end of a particular period has not been
material to total revenue at the end of the same period.

International Revenues

International revenues (sales outside the United States) accounted for approximately 45.8% of our net

revenues for the year ended December 31, 2008, 44.5% of our net revenues for the year ended December 31,
2007 and 47.4% for the year ended December 31, 2006. For detailed information on international revenues,
please refer to Note 12 to our consolidated financial statements included in this Annual Report on Form 10-K for
the year ended December 31, 2008.

Segment Revenues

An analysis of our reportable segment net revenue is presented below:

Year Ended December 31,

2008

2007

2006

Revenue
Growth
2007 to 2008

Revenue
Growth
2006 to 2007

Americas(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA(2)
Asia-Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . .
Online Services division . . . . . . . . . . . . . . . . .

$ 670,523
524,465
128,301
260,065

$ 614,181
447,201
116,816
213,744

(In thousands)
$ 499,278
391,650
94,596
148,795

9.2%
17.3
9.8
21.7

Consolidated net revenues . . . . . . . . . . . .

$1,583,354

$1,391,942

$1,134,319

13.8

23.0%
14.2
23.5
43.6

22.7

(1) Our Americas segment is comprised of the United States, Canada and Latin America.

(2) Defined as Europe, Middle East and Africa.

With respect to our segment revenues, the increase in net revenues for the comparative periods presented

was due primarily to the factors previously discussed across our reportable segments. For additional information

47

on our segment revenues, please refer to Note 12 of our consolidated financial statements included in this Annual
Report on Form 10-K for the year ended December 31, 2008.

Cost of Net Revenues

Year Ended December 31,

2008

2007

2006

2008
Compared to
2007

2007
Compared to
2006

Cost of product license revenues . . . . . . . . . . . . . . .
Cost of services revenues . . . . . . . . . . . . . . . . . . . . .
Amortization of product related intangible assets . .

$ 47,801
79,303
48,028

$ 42,984
65,027
29,596

(In thousands)
$32,911
46,585
19,202

$ 4,817
14,276
18,432

Total cost of net revenues . . . . . . . . . . . . . . . .

$175,132

$137,607

$98,698

$37,525

$10,073
18,442
10,394

$38,909

Cost of product license revenues consists primarily of hardware, product media and duplication, manuals,

packaging materials, shipping expense, server capacity costs and royalties. Cost of services revenue consists
primarily of compensation and other personnel-related costs of providing technical support and consulting, as
well as the costs related to our Online Services products. Also included in cost of net revenues is amortization of
product related intangible assets.

Cost of product licenses revenues increased during 2008 when compared to 2007 primarily due to increased

sales of our Application Networking products which contain hardware components that have a higher cost than
our other software products. Cost of services revenues increased during 2008 compared to 2007 primarily due to
and an increase in support and consulting related to our Application Virtualization and Application Networking
products and to a lesser extent increases in costs related to increased sales of our Online Services products.
Amortization of product related intangible assets increased during 2008 as compared to 2007 primarily due to
amortization of product related intangible assets acquired in acquisitions. For more information regarding our
acquisitions, see “—Overview” and Note 3 to our consolidated financial statements included in this Annual
Report on Form 10-K for the year ended December 31, 2008. We currently anticipate cost of product license
revenues will decrease when comparing the first quarter of 2009 to the fourth quarter of 2008 consistent with
Product License sales.

Cost of product licenses revenues increased during 2007 when compared to 2006 primarily due to increased

sales of our Application Networking products which contain hardware components that have a higher cost than
our other software products. Cost of services revenues increased during 2007 compared to 2006 primarily due to
increases in sales of our Online Services products and an increase in support related to our Application
Virtualization and Application Networking products. Amortization of product related intangible assets increased
during 2007 as compared to 2006 primarily due to amortization of product related intangible assets acquired in
acquisitions.

Gross Margin

Gross margin as a percent of revenue was 88.9% for 2008, 90.1% for 2007 and 91.3% for 2006. The
decrease in gross margin as a percentage of net revenue for all periods presented was primarily due to the
increase in cost of net revenues as discussed above. We currently expect that our gross margin will remain
relatively flat in the first quarter 2009 due to the factors discussed above under “—Cost of Net Revenues.”

Operating Expenses

Foreign Currency Impact on Operating Expenses

A substantial majority of our overseas operating expenses and capital purchasing activities are transacted in

local currencies and are subject to fluctuations in foreign currency exchange rates. In order to minimize the

48

impact on our operating results, we generally initiate our hedging of currency exchange risks up to one year in
advance of anticipated foreign currency expenses. When the dollar is weak, foreign currency denominated
expenses will be higher. These higher expenses will be partially offset by the gain in our hedging contracts. If the
dollar is strong, foreign currency denominated expenses will be lower, and our hedging practices will cause these
lower expenses to be partially offset by the aggregate loss in our hedging contracts. There is a risk that there will
be fluctuations in foreign currency exchange rates beyond the one year timeframe for which we hedge our risk.
Due to the generally stronger dollar during the year ended December 31, 2008 compared to 2007, our operating
expenses benefited when converted to U.S. dollars, which was partially offset by lower gains in our hedging
programs.

Strategic Restructuring Impact on Operating Expenses

On January 28, 2009, we announced the implementation of our Strategic Restructuring Program, which

includes among other things, steps to reduce our headcount by approximately 500 full-time positions,
representing approximately 10% of our global workforce, or the Global Workforce Reduction. In addition, we
are postponing merit increases that would normally occur in the second quarter of 2009 until the fourth quarter of
2009, and the 2009 merit increases for all vice presidents and company officers have been eliminated. In the first
quarter of 2009, we expect to incur a pre-tax charge in the range of approximately $19 million to $23 million
primarily related to our Global Workforce Reduction. In addition, the Global Workforce Reduction expected to
result in an annualized pre-tax savings of approximately $50.0 million.

Also, as part of the Strategic Restructuring Program, we are in the process of assessing the consolidation of

facilities and roles across all groups and geographies to reduce redundancy and increase standardization. In
addition, we are taking further steps to reduce operating costs that include reprioritizing internal projects,
reducing contract workers and limiting travel spending. Due to the Strategic Restructuring Program, we expect
that in 2009, we will experience decreases in operating expenses across all operating areas including research and
development, sales, marketing and support and general and administrative expenses.

Other Items Impacting Operating Expenses

In addition, in the fourth quarter of 2008, we recorded a reduction to operating expenses of approximately

$6.4 million related to an adjustment of payroll taxes initially recorded in conjunction with our voluntary,
independent investigation of our historical stock option granting practices which were reduced upon agreement
with the Internal Revenue Service.

In December 2007, the Financial Accounting Standards Board, or FASB, issued SFAS, No. 141R, Business

Combinations. SFAS No. 141R will require, among other things, the expensing of direct transaction costs,
including deal costs and restructuring costs as incurred and acquired IPR&D assets to be capitalized. The
adoption of SFAS No. 141R is effective on a prospective basis for transactions occurring in 2009. Historically,
we have been acquisitive and if we continue to be so, SFAS No 141R will cause increases in our operating
expenses if we enter into business combinations with material deal or restructuring costs after the standard’s
effective date.

Research and Development Expenses

Year Ended December 31,

2008

2007

2006

2008
Compared to
2007

2007
Compared to
2006

Research and development . . . . . . . . . . . . . . . . . . .

$288,109

$205,103

(In thousands)
$155,331

$83,006

$49,772

Research and development expenses consisted primarily of personnel-related costs. We expensed
substantially all development costs included in the research and development of our products and new

49

functionality added to our existing products as incurred, except for certain core technologies which were
technologically feasible. Research and development expenses increased during 2008 as compared to 2007
primarily due to an increase in stock-based compensation expense primarily related to options and awards
assumed in conjunction with our acquisition of XenSource, Inc., or the XenSource Acquisition. Also contributing
to the increases in research and development expenses are staffing and related personnel costs due continued
investment in our business and the full year impact of our XenSource Acquisition, as well as an increase in office
and facility related costs associated with increased headcount. For more information regarding our acquisitions
see, “—Overview” and Note 3 to our consolidated financial statements included in this Annual Report on Form
10-K for the year ended December 31, 2008.

Research and development expenses increased during 2007 as compared to 2006 primarily due to an
increase in staffing and related personnel costs due to the full year impact of our 2006 Acquisitions, our 2007
Acquisitions and continued investments in our business, which included the hiring of personnel.

Sales, Marketing and Services Expenses

Year Ended December 31,

2008

2007

2006

2008
Compared to
2007

2007
Compared to
2006

Sales, marketing and services . . . . . . . . . . . . . . . .

$669,569

$590,409

(In thousands)
$480,343

$79,160

$110,066

Sales, marketing and services expenses consisted primarily of personnel-related costs, including sales
commissions, and the costs of marketing programs aimed at increasing revenue, such as advertising, trade shows,
public relations and other market development programs. Sales, marketing and services expenses increased
during 2008 compared to 2007 primarily due to an increase in headcount and the associated increase in salaries
and employee related expenses due to our continued investment partially offset by decreases in commissions.
Also contributing to the increase sales, marketing and services expenses were increases in marketing program
costs related to our worldwide advertising campaigns, an increase in stock-based compensation expense
primarily related to options and awards assumed in conjunction with our XenSource Acquisition and an increase
in commissions paid to our resellers. During 2008, we also increased our utilization of personnel for revenue
generating activities, which is reflected as cost of service revenues rather than sales, marketing and services
expense. For more information regarding our acquisitions see, “—Overview” and Note 3 to our consolidated
financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2008.

Sales, marketing and services expenses increased during 2007 compared to 2006 primarily due to an
increase in headcount and the associated increase in salaries and employee related expenses due to our continued
investment in our business and the full year impact of our 2006 Acquisitions and the impact of our 2007
Acquisitions. In addition, sales, marketing and services expenses increased during 2007 compared to 2006 due to
an increase in commissions related to our growing sales-force and payments made under new programs adopted
to promote sales of our newer products, an increase in commissions paid to our resellers and, to a lesser extent,
an increase in marketing program costs related to our worldwide advertising campaigns. During 2007, we also
increased our utilization of personnel for revenue generating activities, which is reflected as cost of service
revenues rather than sales, marketing and services expenses.

General and Administrative Expenses

Year Ended December 31,
2007

2006

2008

2008
Compared to
2007

2007
Compared to
2006

General and administrative . . . . . . . . . . . . . . . . . .

$256,679

$229,229

(In thousands)
$178,669

$27,450

$50,560

50

General and administrative expenses consisted primarily of personnel-related related costs and expenses

related to outside consultants assisting with regulatory compliance and information systems, as well as
accounting and legal fees. General and administrative expenses increased during 2008 compared to 2007
primarily due to an increase in headcount and the associated salaries and employee related expenses, an increase
in depreciation primarily related to information systems and an increase IT support and data services all of which
were to support our growth in 2008. Also contributing to the increase in general and administrative expenses is
an increase in stock-based compensation expense primarily related to options and awards assumed in conjunction
with our XenSource Acquisition. These increases are partially offset by a decrease in consulting and legal fees
primarily related to the investigation of our historical stock option granting practices and the associated
restatements of our prior consolidated financial statements, which concluded in 2007. For more information
regarding our acquisitions see, “—Overview” and Note 3 to our consolidated financial statements included in this
Annual Report on Form 10-K for the year ended December 31, 2008.

General and administrative expenses increased during 2007 compared to 2006 primarily due to an increase
in headcount and the associated salaries and employee related expenses due to our continued investment in our
business and systems to support our growth, the full year impact of our 2006 Acquisitions and the impact of our
2007 Acquisitions, an increase in expenses related to outside consultants assisting us with information systems
and regulatory compliance, increases in auditing, consulting and legal fees primarily related to the investigation
of our historical stock option granting practices and the associated restatements of our prior consolidated
financial statements and, to a lesser extent, an increase in depreciation primarily related to information systems.

Amortization of Other Intangible Assets

Year Ended December 31,

2008

2007

2006

2008
Compared to
2007

2007
Compared to
2006

Amortization of the other intangible assets . . . . . . . . .

$22,724

$17,387

(In thousands)
$16,934

$5,337

$453

The increase in amortization of other intangible assets during 2008 as compared to 2007 was primarily due
to the full year impact of amortization related to other intangible assets acquired in our XenSource Acquisition.
The increase in amortization of other intangible assets during 2007 as compared to 2006 was not significant. As
of December 31, 2008, we had unamortized other identified intangible assets with estimable useful lives in the
net amount of $84.5 million. For more information regarding our acquisitions see, “—Overview” and Note 3 to
our consolidated financial statements included in this Annual Report on Form 10-K for the year ended
December 31, 2008.

In-Process Research and Development

Year Ended December 31,
2006
2007
2008

2008
Compared to
2007

2007
Compared to
2006

(In thousands)

In-process research and development

. . . . . . . . . . . . . . . .

$1,140

$9,800

$1,000

$(8,660)

$8,800

In 2008, $1.1 million of the purchase price paid for our acquisition of Vapps was allocated to IPR&D, in
2007, $9.8 million of the purchase price paid for our 2007 Acquisitions was allocated to IPR&D, and in 2006,
$1.0 million of the purchase price paid for our 2006 Acquisitions was allocated to IPR&D. The amounts
allocated to IPR&D in our acquisitions had not yet reached technological feasibility, had no alternative future use
and were written-off at the date of the acquisitions in accordance with FASB Interpretation No. 4, Applicability
of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method. For more
information regarding the acquisitions, see “—Overview” and Note 3 to our consolidated financial statements in
this Annual Report on Form 10-K for the year ended December 31, 2008.

51

Our efforts with respect to the acquired technologies currently consist of design and development that may

be required to support the release of the technologies into updated versions of existing service offerings and
potentially new product and service offerings related to the products acquired in our XenSource, Ardence, and
NetScaler Acquisitions. We currently expect that we will successfully develop new products or services utilizing
the acquired in-process technology, but there can be no assurance that commercial viability of future product or
service offerings will be achieved. Furthermore, future developments in the software industry, changes in
technology, changes in other products and offerings or other developments may cause us to alter or abandon
product plans. Failure to complete the development of projects in their entirety, or in a timely manner, could have
a material adverse impact on our financial condition and results of operations.

The fair value assigned to IPR&D was based on valuations prepared using methodologies and valuation

techniques consistent with those used by independent appraisers. All fair values were determined using the
income approach, which includes estimating the revenue and expenses associated with a project’s sales cycle and
by estimating the amount of after-tax cash flows attributable to the projects. The future cash flows were
discounted to present value utilizing an appropriate risk-adjusted rate of return, which ranged from 20% to 36%.
The rate of return included a factor that takes into account the uncertainty surrounding the successful
development of the IPR&D.

SFAS No. 141R will require, among other things, acquired IPR&D assets to be capitalized. If we enter into

business combinations with material IPR&D after January 1, 2009, the standard’s effective date, we will be
required to capitalize those costs, which will reduce operating expenses in the period of the acquisition and
increase amortization of product related intangible assets if completion of development is reached which will be
included in cost of net revenues in future periods.

Interest Income

Year Ended December 31,

2008

2007

2006

2008
Compared to
2007

2007
Compared to
2006

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$31,506

$49,704

(In thousands)
$41,210

$(18,198)

$8,494

Interest income decreased during 2008 as compared to 2007 primarily due to decreased interest rates earned
on cash equivalents and investment balances. We expect interest income to decrease in 2009 due to the effect of
lower interest rates as a result of current market conditions. Interest income increased during 2007 as compared
to 2006 primarily due to overall higher average cash, cash equivalent and investment balances that resulted
primarily from an increase in cash from operations and proceeds received from employee stock-based
compensation plans, partially offset by an increase in cash paid for acquisitions and capital expenditures. For
more information see “—Overview” and “—Liquidity and Capital Resources” and Note 3 to our consolidated
financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2008.

Interest Expense

Year Ended December 31,

2008

2007

2006

2008
Compared to
2007

2007
Compared to
2006

(In thousands)

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(444) $(737) $(927)

$293

$190

The decrease in interest expense when comparing 2008 to 2007 and comparing 2007 to 2006 is not

significant. For more information see “—Liquidity and Capital Resources” and Note 9 to our consolidated
financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2008.

52

Other Expense, Net

Year Ended December 31,

2008

2007

2006

2008
Compared to
2007

2007
Compared to
2006

(In thousands)

Other expense, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(4,140) $(466) $(546)

$(3,674)

$80

Other expense, net is primarily comprised of remeasurement and foreign currency transaction gains (losses),

other-than-temporary declines in the value of our equity investments and debt instruments and realized gains
(losses) on the sale of available-for-sale and trading investments. Other expense, net increased when comparing
2008 to 2007 due primarily to an increase in losses related to our foreign currency transactions and to a lesser
extent, impairments of investments that we determined to have an other-than-temporary decline in fair value
partially offset by gains recorded on an enforceable, non-transferable right to sell our auction rate securities, or
the Put Option, recorded in conjunction with a legal settlement related to our investments in those auction rate
securities. Upon recording the Put Option, we contemporaneously made the fair value election as allowed by
SFAS No. 159, as amended, The Fair Value Option for Financial Assets and Financial Liabilities, or SFAS
No. 159. Therefore, the initial recording of the Put Option and subsequent changes in its fair value are recorded
in other expense, net. Other expense, net remained relatively flat when comparing 2007 to 2006. For more
information see “—Liquidity and Capital Resources” and Note 4 to our consolidated financial statements
included in this Annual Report on Form 10-K for the year ended December 31, 2008.

Income Taxes

On January 1, 2007, we adopted the provisions of FASB Interpretation, or FIN No. 48, Accounting for
Uncertainty in Income Taxes. As of December 31, 2008, our net unrecognized tax benefits totaled approximately
$28.3 million. At December 31, 2008, there were no amounts for tax positions which would not affect the annual
effective tax rate and approximately $0.2 million of accrued interest on tax positions.

We are subject to federal income taxes in the United States as well as income taxes of multiple state and

foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S.
income tax examinations by tax authorities for years prior to 2004. The Internal Revenue Service commenced an
examination of our U.S. federal income tax returns for 2004 and 2005 in the third quarter of 2006.

We are required to estimate our income taxes in each of the jurisdictions in which we operate as part of the
process of preparing our consolidated financial statements. At December 31, 2008, we had approximately $64.9
million in deferred tax assets. SFAS No. 109, Accounting for Income Taxes, requires a valuation allowance to
reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some
portion or all of the deferred tax assets will not be realized. We review deferred tax assets periodically for
recoverability and make estimates and judgments regarding the expected geographic sources of taxable income
and gains from investments, as well as tax planning strategies in assessing the need for a valuation allowance. At
December 31, 2008, we determined that $14.2 million valuation allowance relating to deferred tax assets for net
operating losses from acquired companies and unrealized losses from temporary impairments on available-for-
sale investments was necessary. If the estimates and assumptions used in our determination change in the future,
we could be required to revise our estimates of the valuation allowances against our deferred tax assets and adjust
our provisions for additional income taxes.

In the ordinary course of global business, there are transactions for which the ultimate tax outcome is
uncertain; thus judgment is required in determining the worldwide provision for income taxes. We provide for
income taxes on transactions based on our estimate of the probable liability. We adjust our provision as
appropriate for changes that impact our underlying judgments. Changes that impact provision estimates include
such items as jurisdictional interpretations on tax filing positions based on the results of tax audits and general
tax authority rulings. Due to the evolving nature of tax rules combined with the large number of jurisdictions in

53

which we operate, it is possible that our estimates of our tax liability and the realizability of our deferred tax
assets could change in the future, which may result in additional tax liabilities and adversely affect our results of
operations, financial condition and cash flows.

We maintain certain operational and administrative processes in overseas subsidiaries and its foreign
earnings are taxed at lower foreign tax rates. We do not expect to remit earnings from our foreign subsidiaries.

We establish tax reserves when, despite our belief that our tax return positions are fully supportable, certain

of these positions may be challenged. While it is often difficult to predict whether we will prevail, we believe
that our tax reserves reflect the probable outcome of known contingencies. As such, included in our effective tax
rate for the year ended December 31, 2008 is an additional tax reserve of approximately $2.9 million related to
uncertainties arising in 2007 partially offset by a reduction of approximately $1.8 million in tax reserves related
to the expiration of a statute of limitations for the 2004 tax year.

In 2008, our effective tax rate increased to approximately 16.6% from (3.5%) when comparing the three
months ended December 31, 2008 to the three months ended December 31, 2007 primarily due to the fourth
quarter of 2007 including the reduction in tax reserves for uncertain tax positions related to prior years taken in
2007. When comparing the twelve months ended December 31, 2008 to the twelve months ended December 31,
2007, our effective tax rate decreased to 9.5% from 14.5% primarily due to an increase in income in geographic
locations that are taxed at lower rates and a corresponding decrease in income in geographic locations taxed at
higher rates partially offset by the reduction in tax reserves for uncertain tax positions related to prior years taken
in 2007. The decrease in income in geographic locations taxed at higher rates is primarily due to an increase in
stock-based compensation expense and amortization of intangible assets.

We are subject to the continuous examination of our income tax returns by tax authorities. We regularly
assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our
provision for income taxes. There can be no assurance, however, that the outcomes from these continuous
examinations will not have an adverse effect on our effective tax rate.

Liquidity and Capital Resources

During 2008, we generated positive operating cash flows of $462.1 million. These cash flows related
primarily to net income of $178.3 million, adjusted for, among other things, non-cash charges including stock-
based compensation expense of $124.6 million and depreciation and amortization of $123.7 million. Also
attributing to these cash inflows is an aggregate increase in cash flow from our operating assets and liabilities of
$43.4 million, net of the effects of acquisitions. These operating cash inflows are partially offset by a $6.4
million benefit related to an adjustment of payroll taxes and $6.8 million related to a deferred income tax benefit.
Our investing activities used $158.6 million of cash consisting primarily of the expenditure of $181.0 million for
the purchase of property and equipment, including the purchase of our headquarters building and $68.4 million in
cash paid for licensing agreements and acquisitions. These investing cash outflows are partially offset by the net
sales and maturities of our available-for-sale investments of $90.9 million. Our financing activities used cash of
$206.9 million, primarily related to $256.5 million paid for stock repurchases. This cash outflow was partially
offset by $44.4 million in proceeds received from employee stock compensation plans and $5.6 million related to
excess tax benefits from the exercise of stock-based awards.

During 2007, we generated positive operating cash flows of $422.3 million. These cash flows related

primarily to net income of $214.5 million, adjusted for, among other things, non-cash charges including
depreciation and amortization of $85.2 million, stock-based compensation expense of $65.5 million and the tax
effect of stock-based compensation of $15.5 million. These cash inflows are partially offset by an operating cash
outflow of $17.8 million related to the excess tax benefit due to the exercise of stock-based awards. Also
attributing to these cash inflows is an aggregate increase in cash flow from our operating assets and liabilities of
$38.6 million, net of the effects of acquisitions. Our investing activities used $417.6 million consisting primarily

54

of the net purchases after reinvestment, from sales and maturities of our available-for-sale investments of $180.4
million. These cash outflows also consisted of cash paid for our 2007 Acquisitions, net of cash acquired, of
$148.1 million and the expenditure of $85.9 million for the purchase of property and equipment. Our financing
activities used cash of $131.8 million primarily related to $260.0 million paid under our stock repurchase
programs and $8.0 million paid on our debt. These cash outflows are partially offset by $118.4 million in
proceeds received from employee stock compensation plans and $17.8 million related to excess tax benefits from
the exercise of stock-based awards.

Historically, significant portions of our cash inflows were generated by our operations. We currently expect

this trend to continue throughout 2009. We believe that our existing cash and investments together with cash
flows expected from operations will be sufficient to meet expected operating and capital expenditure
requirements for the next 12 months. We continue to search for suitable acquisition candidates and could acquire
or make investments in companies we believe are related to our strategic objectives. We could from time to time
seek to raise additional funds through the issuance of debt or equity securities for larger acquisitions.

Cash and Investments

December 31,

2008

2007

2008
Compared to
2007

Cash and investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$850,881

(In thousands)
$798,510

$52,371

The increase in cash and investments at December 31, 2008 as compared to December 31, 2007, is primarily

due to an increase in cash from operations and proceeds received from employee stock-based compensation
plans, partially offset by an increase in cash paid for capital expenditures, licensing agreements and acquisitions,
net of cash acquired. We generally invest our cash and cash equivalents in investment grade, highly liquid
securities to allow for flexibility in the event of immediate cash needs. Our short-term and long-term investments
primarily consist of interest-bearing securities. See “— Liquidity and Capital Resources” and Note 4 to our
consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31,
2008 for further information.

Available-for-sale investments

During 2008, we recorded an unrealized loss of approximately $13.5 million related to our $50.0 million

face value investment issued by AIG Matched Funding Corporation, or the AIG Capped Floater, which matures
in September 2011. American International Group, Inc., or AIG, as the issuer’s parent, provided a guarantee of
the security at the time of purchase, in September 2006. The unrealized loss was primarily caused by AIG
experiencing liquidity challenges which were reportedly precipitated by problems in the capital markets. AIG’s
lack of liquidity triggered a downgrade in the credit ratings for its long-term issues to A- and A3 by two rating
agencies on October 3, 2008. As a result of AIG’s liquidity challenges, the Federal Reserve intervened with a
five-year credit facility to help stabilize AIG and the overall market. To date, AIG has not been reported to have
defaulted on the terms of its loan from the Federal Reserve and continues to pay interest on the AIG Capped
Floater. Because we have the ability and intent to hold this security until a recovery of fair value, which may not
occur until maturity, we do not consider the security to be other-than-temporarily impaired.

If AIG’s financial position further deteriorates, we may be required to further adjust the carrying value of
the AIG Capped Floater and potentially recognize an impairment charge for an other-than-temporary decline in
the fair value of the investment. Based on our available cash and other investments, we do not currently
anticipate that the lack of liquidity caused by holding the AIG Capped Floater to recovery will have a material
adverse effect on our financial position.

55

Gross realized gains on sales of available-for-sale investments during 2008 were $0.5 million and gross
realized losses on available-for-sale investments during 2008 were $1.4 million. Gross realized gains and losses
on sales of available-for-sale investments during 2007 were not material. The other-than-temporary losses on
available-for-sale investments were primarily comprised of an impairment charge of approximately $1.1 million
related to an other-than-temporary impairment of an investment in our portfolio due to the bankruptcy of Lehman
Brothers Holdings.

We continue to monitor our overall investment portfolio and if the credit ratings of the issuers of our

investments deteriorate or if the issuers experience financial difficulty, including bankruptcy, we may be required
to make additional adjustments to the carrying value of the securities in our investment portfolio and recognize
additional impairment charges for declines in fair value that are determined to be other-than-temporary.

Trading Investments

As of December 31, 2008, we held triple-A rated municipal auction rate securities, with an aggregate par

value of approximately $45.5 million, whose underlying assets are generally student loans that are substantially
backed by the federal government under the Federal Family Education Loan Program through investment
accounts managed by UBS Financial Services, Inc., or UBS. The market for municipal auction rate securities in
our portfolio began experiencing auction failures on February 13, 2008 and there have been no successful
auctions for the securities held in our portfolio since the failures began. In November 2008, we formally accepted
the terms of a settlement from UBS. Upon accepting the terms of the settlement, we received the Put Option, that
would enable us to sell our auction rate securities back to UBS during the period between June 30, 2010 and
July 2, 2012 at par value. Accordingly, we recorded the fair value of the Put Option in other assets in our
financial statements and contemporaneously made the fair value election as allowed by SFAS No. 159. Therefore
beginning in the fourth quarter of 2008, we began recording changes in the fair value of the Put Option in
earnings. In conjunction with recording the Put Option, we also transferred our auction rate securities from
available-for-sale to trading in the fourth quarter of 2008 and recorded a $1.1 million loss in other expense, net,
upon the transfer. Accordingly, we will record changes in the fair value of our auction rate securities in earnings.
During the year ended December 31, 2008, we realized a gain of $7.4 million related to the Put Option and
realized a loss of $7.5 million related to our investments in auction rate securities. See Notes 4 and 5 to our
consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31,
2008 for further information.

Fair Value Measurements

On January 1, 2008, we adopted SFAS No. 157, Fair Value Measurements, which, among other things,

defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each
major asset and liability category measured at fair value on either a recurring or nonrecurring basis. SFAS
No. 157 clarifies that fair value is an exit price, representing the amount that would either be received to sell an
asset or be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is
a market-based measurement that should be determined based on assumptions that market participants would use
in pricing an asset or liability. As a basis for considering such assumptions, SFAS No. 157 establishes a three-tier
fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

•

•

•

Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or
indirectly; and

Level 3. Unobservable inputs in which there is little or no market data, which require the reporting
entity to develop its own assumptions.

56

Assets and Liabilities Measured at Fair Value on a Recurring Basis

We measure our cash flow hedges at fair value based on indicative prices in active markets and we generally
measure our investments in available-for-sale securities at fair value based on quoted prices in active markets for
identical securities. We measured our AIG Capped Floater, which is included in Level 2, using indicative pricing
for another security issued by AIG with similar terms which had regular trading activity. Due to the illiquidity in
the municipal auction rate securities market caused by failed auctions, quoted prices in active markets are not
currently available for our investments in municipal auction rate securities. We measured these securities at fair
value using a discounted cash flow model. In our discounted cash flow model, we used several assumptions to
derive a fair value for our investments in municipal auction rate securities including a discount rate based on the
credit quality of the underlying investments and a factor to further discount the investments for the illiquidity
currently present in the market for these securities. Accordingly, these securities changed from Level 1 to Level 3
within SFAS No. 157’s three-tier fair value hierarchy since valuation at December 31, 2007. Also included in
Level 3 is the Put Option. In order to determine the fair value of the Put Option, we measured the differential
between the aggregate par value of our auction rate securities and their fair value as of the reporting date and
applied a discount rate that considers both the time period between the reporting date and the first date we are
able to exercise our right to put the auction rate securities to UBS per the terms of the settlement and the credit
worthiness of UBS.

Assets Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)

Balance at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers to Level 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total realized gains (losses) included in earnings . . . . . . . . . . . . . . . . . .

Balance at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Put Option

$ —
—
7,378

$7,378

Long-term
Investments

(In thousands)
$ —
45,450
(7,531)

Total

$ —
45,450
(153)

$37,919

$45,297

Realized gains (losses) included in earnings for the period are reported in other (expense) income, net.

Restricted Cash Equivalents and Investments

December 31,

2008

2007

2008
Compared to
2007

Restricted cash equivalents and investments . . . . . . . . . . . . . . . . . . . . . .

$883

(In thousands)
$63,735

$(62,852)

Restricted cash equivalents and investments as of December 31, 2007 are primarily comprised of
approximately $62.8 million in investment securities and cash equivalents pledged as collateral for specified
obligations under our synthetic lease arrangement.

We were a party to a synthetic lease arrangement for our corporate headquarters office space in Fort
Lauderdale, Florida. The initial term of the synthetic lease was seven years, expiring in April 2009. At any time
during the lease term and upon a 30-days’ written notice, we had the option to purchase the property for an
amount representing the original property cost and transaction fees of approximately $61.0 million plus any lease
breakage costs and outstanding amounts owed. In October 2008, we terminated the synthetic lease, purchased the
underlying property and ceased to be bound by the lease covenants. The majority of the amounts related to our
synthetic lease collateral arrangement and classified as restricted cash equivalents and investments as of
December 31, 2007, were used to purchase the property and are no longer restricted. See Note 10 to our
consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31,
2008 for further information.

57

Accounts Receivable, Net

December 31,

2008

2007

2008
Compared to
2007

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$239,998
(1,641)
(7,061)

(In thousands)
$230,422
(1,670)
(2,891)

$ 9,576
29
(4,170)

Accounts receivable, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$231,296

$225,861

$ 5,435

The increase in accounts receivable at December 31, 2008 compared to December 31, 2007 was primarily

due to an increase in sales, particularly in the last month of 2008 compared to the last month of 2007. Our
allowance for returns remained relatively constant during 2008 as compared to 2007. The activity in our
allowance for returns was comprised of $2.1 million in credits issued for stock balancing rights during 2008
offset by $2.1 million of provisions for returns recorded during 2008. Our allowance for doubtful accounts
increased by $4.2 million when comparing 2008 to 2007. The activity in our allowance for doubtful accounts was
comprised primarily of an additional $3.4 million acquired in conjunction with our acquisition of Vapps, $1.6
million of provisions for doubtful accounts recorded during the year partially offset by $0.8 million of
uncollectible accounts written off, net of recoveries. From time to time, we could maintain individually
significant accounts receivable balances from our distributors or customers, which are comprised of large
business enterprises, governments and small and medium-sized businesses. If the financial condition of our
distributors or customers deteriorates, our operating results could be adversely affected. At December 31, 2008
and 2007, no distributor or customer accounted for more than 10% of our accounts receivable. For more
information regarding significant customers see Note 12 to our consolidated financial statements included in this
Annual Report on Form 10-K for the year ended December 31, 2008.

Credit Facility and Term Loan

Effective on August 9, 2005, we entered into the Credit Facility with a group of financial institutions, or the
Lenders. Effective September 27, 2006, we entered into an amendment and restatement of the Credit Facility, or
the Amendment. The Amendment decreased the overall range of interest we will pay on amounts outstanding on
the Credit Facility and lowered the facility fee. In addition, the Amendment extended the term of the Credit
Facility. The Credit Facility, as amended, allows us to increase the revolving credit commitment up to a
maximum aggregate revolving credit commitment of $175.0 million. The Credit Facility, as amended, currently
provides for a revolving line of credit that will expire on September 27, 2011 in the aggregate amount of $100.0
million, subject to continued covenant compliance. A portion of the revolving line of credit (1) in the aggregate
amount of $25.0 million may be available for issuances of letters of credit and (2) in the aggregate amount of
$15.0 million may be available for swing line loans. The Credit Facility, as amended, currently bears interest at
the London Interbank Offered Rate, or LIBOR, plus 0.32% and adjusts in the future in the range of 0.32% to
0.80% above LIBOR based on the level of our total debt and our adjusted earnings before interest, taxes,
depreciation and amortization, or EBITDA. In addition, we are required to pay an annual facility fee ranging
from 0.08% to 0.20% based on the aggregate amount available under the Credit Facility, as amended, and the
level of our total debt and adjusted EBITDA. During the year ended December 31, 2008, no funds were
borrowed under the Credit Facility, as amended, and as of December 31, 2008 there were no amounts
outstanding under the Credit Facility, as amended.

The Credit Facility, as amended, contains customary default provisions, and we must comply with various
financial and non-financial covenants. The financial covenants consist of a minimum interest coverage ratio and
a maximum consolidated leverage ratio. The primary non-financial covenants contain certain limits on our ability
to pay dividends, conduct certain mergers or acquisitions, make certain investments and loans, incur future
indebtedness or liens, alter our capital structure or sell stock or assets. As of December 31, 2008, we were in
compliance with all covenants of the Credit Facility.

58

Effective on August 9, 2005, we entered into the Term Loan with the Lenders. The Term Loan provided for

an eighteen-month single-draw term loan facility in the aggregate amount of $100.0 million. The Term Loan’s
interest rate was LIBOR plus 0.5% and adjusted in the range of 0.5% to 1.25% above LIBOR based on the level
of our total debt and adjusted EBITDA. In addition, we were required to pay an annual facility fee ranging from
0.125% to 0.25% based on the aggregate amount of the Term Loan and the level of our total debt and adjusted
EBITDA. We used the proceeds from the Term Loan to partially fund the repatriation of certain of our foreign
earnings in connection with the American Jobs Creation Act. In February 2006, we repaid the remaining $31.0
million outstanding under the Term Loan in full.

Stock Repurchase Program

Our Board of Directors authorized an ongoing stock repurchase program with a total repurchase authority
granted to us of $1.8 billion. We may use the approved dollar authority to repurchase stock at any time until the
approved amounts are exhausted. The objective of our stock repurchase program is to improve stockholders’
returns. At December 31, 2008, approximately $77.0 million was available to repurchase common stock pursuant
to the stock repurchase program. All shares repurchased are recorded as treasury stock. A portion of the funds
used to repurchase stock over the course of the program was provided by proceeds from employee stock option
exercises and the related tax benefit.

We are authorized to make open market purchases of our common stock using general corporate funds.
Additionally, we entered into structured stock repurchase arrangements with large financial institutions using
general corporate funds in order to lower the average cost to acquire shares. These programs include terms that
require us to make up-front payments to the counterparty financial institution and result in the receipt of stock
during the agreement or the receipt of either stock or cash at the maturity of the agreement, depending on market
conditions.

During the year ended December 31, 2008, we took delivery of 4,406,757 shares at an average price of
$33.30 per share from our structured repurchase agreements and we expended approximately $197.6 million on
open market purchases repurchasing 6,451,591 shares of outstanding common stock at an average price of
$30.63. In addition, during the period we made up-front payments of $58.9 million to certain financial
institutions related to structured stock repurchase agreements. As of December 31, 2008, we had no prepaid
notional amounts remaining under our structured stock repurchase programs.

During the year ended December 31, 2007, we took delivery of 1,655,089 shares at an average price of
$35.34 per share from our structured repurchase agreements and we expended approximately $150.0 million on
open market purchases repurchasing 3,720,800 shares of outstanding common stock at an average price of
$40.31. In addition, during the period we made up-front payments of $110.0 million to certain financial
institutions related to structured stock repurchase agreements.

During the year ended December 31, 2006, we took delivery of 4,307,112 shares at an average price of
$30.76 per share from our structured repurchase agreements and we expended approximately $159.8 million on
open market purchases repurchasing 5,193,410 shares of outstanding common stock at an average price of
$30.77. In addition, during the period we made up-front payments of $114.4 million to certain financial
institutions related to structured stock repurchase agreements.

Contractual Obligations and Off-Balance Sheet Arrangement

Contractual Obligations

We have certain contractual obligations that are recorded as liabilities in our consolidated financial

statements. Other items, such as operating lease obligations, are not recognized as liabilities in our consolidated
financial statements, but are required to be disclosed in the notes to our consolidated financial statements.

59

The following table summarizes our significant contractual obligations at December 31, 2008 and the future

periods in which such obligations are expected to be settled in cash. Additional details regarding these
obligations are provided in the notes to our consolidated financial statements (in thousands):

Total

Less than 1 Year

1-3 Years

4-5 Years More than 5 Years

Payments due by period

Operating lease obligations(1)
. . . . . . . . . . . .
Purchase obligations(2) . . . . . . . . . . . . . . . . . .

$223,802
6,311

Total contractual obligations(3)

. . . . . . . . . . .

$230,113

$45,668
6,311

$51,979

$74,595

$50,839

—

—

$74,595

$50,839

$52,700

—

$52,700

(1)

(2)

(3)

In 2008, we entered into a lease to acquire additional office space in Santa Clara, CA. The rental
commencement date will not begin until 2011and the pricing for the lease will not be finalized until a future
date. Accordingly, the future payment obligations related to this lease are not included in the table above.

Purchase obligations represent non-cancelable commitments to purchase inventory ordered before year-end.

Total contractual obligations do not include agreements where our commitment is variable in nature or
where cancellations without payment provisions exist and excludes $28.3 million of liabilities related to
uncertain tax positions recorded in accordance with FIN No. 48, because we could not make reasonably
reliable estimates of the period or amount of cash settlement with the respective taxing authorities. See Note
10 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended
December 31, 2008 for further information.

As of December 31, 2008, we did not have any individually material capital lease obligations or other

material long-term commitments reflected on our consolidated balance sheets.

Off-Balance Sheet Arrangement

During 2002, we became a party to a synthetic lease arrangement totaling approximately $61.0 million for

our corporate headquarters office space in Fort Lauderdale, Florida. The synthetic lease represented a form of
off-balance sheet financing under which an unrelated third-party lessor funded 100% of the costs of acquiring the
property and leased the asset to us. The synthetic lease qualified as an operating lease for accounting purposes
and as a financing lease for tax purposes. We did not include the property or the related lease debt as an asset or a
liability in our consolidated balance sheets. Consequently, payments made pursuant to the lease were recorded as
operating expenses in our consolidated statements of income. We entered into the synthetic lease in order to lease
our headquarters properties under more favorable terms than under our previous lease arrangements.

The initial term of the synthetic lease was seven years, expiring in April 2009. The lease payments varied
based on LIBOR plus a margin. At any time during the lease term and upon 30-days’ written notice, we had the
option to purchase the property for an amount representing the original property cost and transaction fees of
approximately $61.0 million plus any lease breakage costs and outstanding amounts owed. Effective October 23,
2008, we exercised our option and purchased the property for approximately $61.1 million, including closing
costs and legal fees. There were no lease breakage costs incurred.

The synthetic lease included certain financial covenants including a requirement for us to maintain a
pledged balance of approximately $62.8 million in cash and/or investment securities as collateral. This amount
was included in restricted cash equivalents and investments in our consolidated balance sheet as of December 31,
2007. The synthetic lease also included non-financial covenants, including the maintenance of the property and
adequate insurance, prompt delivery of financial statements to the administrative agent of the lessor and prompt
payment of taxes associated with the property. Following the termination of the synthetic lease, we ceased to be
bound by these covenants.

Commitments

Capital expenditures were $181.0 million during 2008, $85.9 million during 2007 and $52.1 million during

2006. During 2008, capital expenditures were primarily related to application and infrastructure delivery to

60

enable growth and enhance management reporting capabilities, the purchase of our corporate headquarters
buildings and leasehold improvements. During 2007, capital expenditures were primarily related to application
and infrastructure delivery to enable growth and enhance management reporting capabilities and leasehold
improvements. We currently anticipate that capital expenditures will decrease in 2009 compared to 2008 levels.

We have an operating lease obligation related to a property that is not fully utilized that continues to 2018
with a total remaining obligation at December 31, 2008 of approximately $5.0 million, of which $0.9 million was
accrued as of December 31, 2008, and is reflected in accrued expenses and other liabilities in consolidated
financial statements. In calculating this accrual, we made estimates, based on market information, including the
estimated vacancy periods and sublease rates and opportunities. We periodically re-evaluate our estimates and if
actual circumstances prove to be materially worse than we estimated, the total charges for these vacant facilities
could be significantly higher. We currently expect that our liabilities related to operating lease obligations for
properties that are not fully utilized will increase due to our Strategic Restructuring Program.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion about our market risk includes “forward-looking statements” that involve risks

and uncertainties. Actual results could differ materially from those projected in the forward-looking statements.
The analysis methods we used to assess and mitigate risk discussed below should not be considered projections
of future events, gains or losses.

We are exposed to financial market risks, including changes in foreign currency exchange rates and interest

rates that could adversely affect our results of operations or financial condition. To mitigate foreign currency
risk, we utilize derivative financial instruments. The counterparties to our derivative instruments are major
financial institutions. All of the potential changes noted below are based on sensitivity analyses performed on our
financial position as of December 31, 2008. Actual results could differ materially.

Discussions of our accounting policies for derivatives and hedging activities are included in Notes 2 and 13

to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended
December 31, 2008.

Exposure to Exchange Rates

A substantial majority of our overseas expense and capital purchasing activities are transacted in local
currencies, including Euros, British pounds sterling, Australian dollars, Japanese yen, Indian rupees, Swiss
francs, Singapore dollars, Hong Kong dollars, Canadian dollars, Danish krone and Swedish krona. To reduce our
exposure to a reduction in U.S. dollar value and the volatility of future cash flows caused by changes in currency
exchange rates, we have established a hedging program. We use foreign currency forward contracts to hedge
certain forecasted foreign currency expenditures. Our hedging program significantly reduces, but does not
entirely eliminate, the impact of currency exchange rate movements.

At December 31, 2008 and 2007, we had in place foreign currency forward sale contracts with a notional
amount of $124.2 million and $104.3 million, respectively, and foreign currency forward purchase contracts with
a notional amount of $339.6 million and $311.1 million, respectively. At December 31, 2008, these contracts had
an aggregate fair liability value of $4.3 million and at December 31, 2007, these contracts had an aggregate fair
asset value of $5.8 million. Based on a hypothetical 10% appreciation of the U.S. dollar from December 31, 2008
market rates, the fair value of our foreign currency forward contracts would decrease by $21.3 million.
Conversely, a hypothetical 10% depreciation of the U.S. dollar from December 31, 2008 market rates would
increase the fair value of our foreign currency forward contracts by $21.3 million, resulting in a net asset
position. In these hypothetical movements, foreign operating costs would move in the opposite direction. This
calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar. In
addition to the direct effects of changes in exchange rates quantified above, changes in exchange rates could also

61

change the dollar value of sales and affect the volume of sales as the prices of our competitors’ products become
more or less attractive. We do not anticipate any material adverse impact to our consolidated financial position,
results of operations, or cash flows as a result of these foreign exchange forward contracts.

Exposure to Interest Rates

We have interest rate exposures resulting from our interest-based available-for-sale and trading securities.

We maintain available-for-sale and trading investments in debt securities and we limit the amount of credit
exposure to any one issuer or type of instrument. The securities in our investment portfolio are not leveraged.
The securities classified as available-for-sale and trading are subject to interest rate risk. The modeling technique
used measures the change in fair values arising from an immediate hypothetical shift in market interest rates and
assumes that ending fair values include principal plus accrued interest and reinvestment income. If market
interest rates were to increase by 100 basis points from December 31, 2008 and 2007 levels, the fair value of the
available-for-sale portfolio would decline by approximately $3.2 million in each period. If market interest rates
were to decrease by 100 basis points from December 31, 2008 and 2007 levels, the fair value of the
available-for-sale portfolio would increase by approximately $3.2 million in each period. These amounts are
determined by considering the impact of the hypothetical interest rate movements on our available-for-sale and
trading investment portfolios. This analysis does not consider the effect of credit risk as a result of the changes in
overall economic activity that could exist in such an environment.

During 2005, we entered into the Credit Facility, as amended in 2006, or the Amended Credit Facility.
Accordingly, we could be exposed to market risk from changes in interest rates on our long-term debt. This
exposure relates to our $100.0 million Amended Credit Facility. Borrowings under the Amended Credit Facility
currently bear interest at variable rates based on LIBOR plus 0.32% and adjusts in the future in the range of
0.32% to 0.80% above LIBOR based on our level of total debt and our adjusted earnings before interest, taxes,
depreciation and amortization, or EBITDA. A hypothetical 1% interest rate change would not have any current
impact on our results of operations as we had no amounts outstanding under the Amended Credit Facility as of
December 31, 2008.

ITEM 8. FINANCIAL STATEMENTS AND SCHEDULES

Our consolidated financial statements and related financial statement schedule, together with the report of

independent registered public accounting firm, appear at pages F-1 through F-42 of this Annual Report on Form
10-K for the year ended December 31, 2008.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

FINANCIAL DISCLOSURE

There have been no changes in or disagreements with our independent registered public accountants on

accounting or financial disclosure matters during our two most recent fiscal years.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of December 31, 2008, our management, with the participation of our President and Chief Executive
Officer and our Senior Vice President and Chief Financial Officer, evaluated the effectiveness of our disclosure
controls and procedures pursuant to Rule 13a-15(b) promulgated under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). Based upon that evaluation, our President and Chief Executive Officer and our
Senior Vice President and Chief Financial Officer concluded that, as of December 31, 2008, our disclosure
controls and procedures were effective in ensuring that material information required to be disclosed in the
reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that

62

such material information is accumulated and communicated to our management, including our President and
Chief Executive Officer and our Senior Vice President and Chief Financial Officer, as appropriate to allow
timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

During the quarter ended December 31, 2008, there were no changes in our internal control over financial

reporting that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial
reporting as such term is defined in Exchange Act Rule 13a – 15(f). Our internal control system was designed to
provide reasonable assurance to our management and the Board of Directors regarding the preparation and fair
presentation of published financial statements. All internal control systems, no matter how well designed have
inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable
assurance with respect to financial statement preparation and presentation. Our management assessed the
effectiveness of our internal control over financial reporting as of December 31, 2008. In making this assessment,
our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”) in Internal Control—Integrated Framework (the COSO criteria). Based on our
assessment we believe that, as of December 31, 2008, our internal control over financial reporting is effective
based on those criteria. The effectiveness of our internal control over financial reporting as of December 31,
2008 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in
their report which appears below.

63

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Citrix Systems, Inc.

We have audited Citrix Systems, Inc.’s internal control over financial reporting as of December 31, 2008,

based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). Citrix Systems, Inc.’s management is
responsible for maintaining effective internal control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Management’s Annual
Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

In our opinion, Citrix Systems, Inc. maintained, in all material respects, effective internal control over

financial reporting as of December 31, 2008, based on the COSO criteria.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board

(United States), the consolidated balance sheets of Citrix Systems, Inc. as of December 31, 2008 and 2007, and
the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows
for each of the three years in the period ended December 31, 2008 of Citrix Systems, Inc. and our report dated
February 24, 2009 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP
Certified Public Accountants

Fort Lauderdale, Florida
February 24, 2009

64

ITEM 9B. OTHER INFORMATION

Our policy governing transactions in our securities by our directors, officers and employees permits our
officers, directors and certain other persons to enter into trading plans complying with Rule 10b5-1 under the
Securities Exchange Act of 1934, as amended. We have been advised that David Friedman, our General Counsel,
Senior Vice President, Human Resources, and entities affiliated with Peter Levine, our Senior Vice President,
Virtualization and Management Division, entered into trading plans in the fourth quarter of 2008 in accordance
with Rule 10b5-1 and our policy governing transactions in its securities. Mr. Friedman entered into his trading
plan to exercise soon to expire stock options and to sell the underlying shares of common stock. The entities
affiliated with Mr. Levine entered into trading plans to achieve diversification in Mr. Levine’s investment
portfolio. We undertake no obligation to update or revise the information provided herein, including for revision
or termination of an established trading plan.

65

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required under this item is incorporated herein by reference to the Company’s definitive

proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and
Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 31,
2008.

ITEM 11. EXECUTIVE COMPENSATION

The information required under this item is incorporated herein by reference to the Company’s definitive

proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and
Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 31,
2008.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND

RELATED STOCKHOLDER MATTERS

Equity Compensation Plan Information

The following table (in thousands, except option price) provides information as of December 31, 2008 about

the securities authorized for issuance to the Company’s employees and non-employee directors under its fixed
stock-based compensation plans:

Plan category

Equity compensation plans approved by

security holders(1)

. . . . . . . . . . . . . . . . . . . .

Equity compensation plans not approved by

security holders(2) . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(A)
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights

(B)
Weighted-average
exercise price of
outstanding options,
warrants and rights

(C)
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (A))

27,078

3,956

31,034

$

$

$

33.17

4.20

29.48

9,900

—

9,900

(1)

Includes securities issuable upon exercise of outstanding options, warrants and rights that were issued
pursuant to the Company’s 1995 Stock Plan, the Third Amended and Restated 1995 Employee Stock
Purchase Plan, the 2000 Director and Officer Stock Option and Incentive Plan, and the Amended and
Restated 1995 Non-Employee Director Stock Option Plan. No additional awards will be granted under these
plans. Also includes securities issuable upon exercise of outstanding options, warrants and rights that have
been issued pursuant to the Company’s 2005 Equity Incentive Plan, which is currently available for future
grants.

(2) Consists of the following plans assumed by the Company in acquisitions: Vapps, Inc.’s 2007 Stock Plan,

Deterministic Networks, Inc.’s 2008 Restricted Stock Unit Plan, Ardence Delaware, Inc.’s 2005 Omnibus Plan,
Ardence Delaware Inc.’s 2006 Restricted Stock Unit Plan, QuickTree, Inc.’s 2007 Restricted Stock Unit Plan,
XenSource Inc.’s 2005 Stock Plan, the NetScaler Plan, the Teros Plan, the Reflectent Stock Plan, the Reflectent
RSU Plan, the Orbital Incentive Plan, the Orbital RSU Plan, the 2000 Net6 Plan and the 2003 Net6 Plan.

Additional information required under this item is incorporated herein by reference to the Company’s
definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities
and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended
December 31, 2008.

66

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR

INDEPENDENCE

The information required under this item is incorporated herein by reference to the Company’s definitive

proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and
Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 31,
2008.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required under this item is incorporated herein by reference to the Company’s definitive

proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and
Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 31,
2008.

67

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) 1. Consolidated Financial Statements.

For a list of the consolidated financial information included herein, see page F-1.

2. Financial Statement Schedules.

The following consolidated financial statement schedule is included in Item 8:

Valuation and Qualifying Accounts

3. List of Exhibits.

Exhibit No. Description

2.1 (13) Agreement and Plan of Merger dated as of June 1, 2005 by and among Citrix Systems, Inc., NCAR

Acquisition Corporation, NCAR LLC, NetScaler, Inc. and Guarev Garg as stockholder representative

2.2 (14) Amendment No. 1 to Agreement and Plan of Merger dated as of June 1, 2005 by and among Citrix

Systems, Inc., NCAR Acquisition Corporation, NCAR LLC, NetScaler, Inc. and Guarev Garg as
stockholder representative, dated as of June 24, 2005

2.3 (27) Agreement and Plan of Merger, dated as of August 4, 2006, by and among Citrix Systems, Inc.,
Banyan Acquisition Corporation, Orbital Data Corporation and John Jaggers as the stockholder

2.4 (30) Agreement and Plan of Merger and Reorganization, dated as of August 14, 2007, by and among
Citrix Systems, Inc., PVA Acquisition Corporation, PVA Acquisition LLC, XenSource, Inc. and
John G. Connors as stockholder representative

2.5 (31) Amendment No. 1 to Agreement and Plan of Merger and Reorganization dated as of August 14,
2007 by and among Citrix Systems, Inc. PVA Acquisition Corporation, PVA Acquisition LLC,
XenSource, Inc. and John G. Connors as stockholder representative, dated September 20, 2007

3.1 (1) Amended and Restated Certificate of Incorporation of the Company

3.2 (35) Certificate of Amendment of Amended and Restated Certificate of Incorporation

3.3 (34) Amended and Restated By-laws of the Company

4.1 (2)

Specimen certificate representing the Common Stock

10.1*

Fourth Amended and Restated 1995 Stock Plan

10.2*(36) Second Amended and Restated 1995 Non-Employee Director Stock Option Plan

10.4*

Second Amended and Restated 2000 Director and Officer Stock Option and Incentive Plan

10.5* (3)

2000 Director and Officer Stock Option and Incentive Plan, Non-Qualified Stock Option Agreement

10.6* (4)

2000 Director and Officer Stock Option and Incentive Plan, Incentive Stock Option Agreement

10.7* (5) Amended and Restated 2000 Stock Incentive Plan of Net6 Inc. (a subsidiary of Citrix Systems, Inc.)

10.8* (6) Amended and Restated 2003 Stock Incentive Plan of Net6 Inc. (a subsidiary of Citrix Systems, Inc.)

10.9 (7) Microsoft Master Source Code Agreement by and between the Company and Microsoft dated

December 16, 2004

68

Exhibit No.

Description

10.10 (8)

License Form by and between the Company and Microsoft Corporation dated December 16, 2004
(with certain information omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission)

10.11 (38) Participation Agreement dated as of April 23, 2002, by and among Citrix Systems, Inc., Citrix

Capital Corp., Selco Service Corporation and Key Corporate Capital, Inc. (the “Participation
Agreement”) (with certain information omitted pursuant to a grant of confidential treatment and
filed separately with the Securities and Exchange Commission)

10.12 (39) Amendment No. 1 to Participation Agreement dated as of June 17, 2002 (with certain information

omitted pursuant to a grant of confidential treatment and filed separately with the Securities and
Exchange Commission)

10.13 (40) Master Lease dated as of April 23, 2002 by and between Citrix Systems, Inc. and Selco Service
Corporation (with certain information omitted pursuant to a grant for confidential treatment and
filed separately with the Securities and Exchange Commission)

10.15* (9)

2005 Equity Incentive Plan

10.16*(22) Amendment to Citrix Systems, Inc. 2005 Equity Incentive Plan

10.17*(10)

2005 Employee Stock Purchase Plan

10.18*(11)

2005 Equity Incentive Plan Incentive Stock Option Master Agreement (Domestic)

10.19*(12)

2005 Equity Incentive Plan Non-Qualified Stock Option Master Agreement (Domestic)

10.20*(23) Citrix Systems, Inc. 2005 Equity Incentive Plan Non-Qualified Stock Option Master Agreement

(Domestic)

10.22*(19) Form of Restricted Stock Unit Agreement under the Citrix Systems, Inc. 2005 Equity Incentive

Plan

10.23*(41) Form of Executive Restricted Stock Unit Agreement under the Citrix Systems, Inc. 2005 Equity

Incentive Plan (Time Based Vesting)

10.24*(21) Form of Restricted Stock Unit Agreement for Non-Employee Directors under the Citrix Systems,

Inc. 2005 Equity Incentive Plan

10.25*(15) Change in Control Agreement dated as of August 4, 2005 by and between Citrix Systems, Inc. and

Mark B. Templeton

10.26*(16) Change in Control Agreement dated as of August 4, 2005 by and between Citrix Systems, Inc. and

each of David J. Henshall, David R. Freidman and John C. Burris

10.27*(25) Change in Control Agreement, dated as of August 4, 2006, by and between Citrix Systems, Inc. and

Brett M. Caine

10.28 .(26) Amended and Restated Credit Agreement dated as of September 27, 2006 among Citrix Systems,
Inc., Citrix Systems International GmbH, JPMorgan Chase Bank N.A., and certain other financial
institutions

10.29 .(17) Term Loan Agreement dated as of August 9, 2005 by and among Citrix Systems, Inc., Citrix

Systems International GMBH, JPMorgan Chase Bank, N.A., J.P. Morgan Securities Inc. and certain
other financial institutions

10.30*(18) NetScaler, Inc. 1997 Stock Plan

10.31 .(28) Type # 3 License Form by and between the Company and Microsoft Corporation dated

September 5, 2007 (with certain information omitted pursuant to a request for confidential
treatment and filed with the Securities and Exchange Commission)

69

Exhibit No.

Description

10.32*(29) Second Amendment to Citrix Systems, Inc. 2005 Equity Incentive Plan

10.33*(32) Employment Agreement dated as of August 14, 2007 by and between Citrix Systems, Inc. and Peter

Levine

10.34*(33) XenSource, Inc. 2005 Stock Plan

10.35*(42) Citrix Systems, Inc. Executive Bonus Plan

10.36*(43) Third Amendment to Citrix Systems, Inc. 2005 Equity Incentive Plan

10.37*(44) Fourth Amendment to Citrix Systems, Inc. 2005 Equity Incentive Plan

10.38*(45) Form of First Amendment to Change of Control Agreement (Chief Executive Officer) between

Citrix Systems, Inc. and Mark Templeton

10.39*(46) Form of First Amendment to Change of Control Agreement between Citrix Systems, Inc. and each

of David J. Henshall and David R. Friedman

10.40*(47) Form of First Amendment to Employment Agreement between Citrix Systems, Inc. and Peter

Levine

10.41*(48) Form of Non-Qualified Stock Option Master Agreement (Domestic)

10.42

Omnibus Assumption and Amendment Agreement dated as of May 30, 2007 by and among Citrix
Systems, Inc., Citrix Capital Corp., Peninsula Investment Corp., Selco Service Corporation, Key
Bank National Association, Allied Irish Banks P.L.C. and Key Bank National Association

10.43*(50) Form of Restricted Stock Unit Agreement

10.44 (51) Amendment No. 1 to Credit Agreement, dated as of September 19, 2008, among Citrix Systems,

Inc., Citrix International GmbH, JPMorgan Chase Bank, N.A., JP Morgan Securities, Inc. and
certain other financial institutions

21.1

23.1

24.1

31.1

31.2

32.1

*
(1)

(2)

(3)

(4)

(5)

(6)

List of Subsidiaries

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm

Power of Attorney (included in signature page)

Rule 13a-14(a) / 15d-14(a) Certifications

Rule 13a-14(a) / 15d-14(a) Certifications

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

Indicates a management contract or any compensatory plan, contract or arrangement.
Incorporated herein by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 (File
No. 33-98542), as amended.
Incorporated herein by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1 (File
No. 33-98542), as amended.
Incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2004.
Incorporated by reference herein to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2004.
Incorporated by reference herein to Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2004.
Incorporated by reference herein to Exhibit 10.8 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2004.

70

(7)

(8)

(9)

(10)

(11)

(12)

(13)

(14)

(15)

(16)

(17)

(18)

(19)

(20)

(21)

(22)

(23)

(24)

(25)

(26)

(27)

(28)

(29)

(30)

(31)

(32)

Incorporated by reference herein to Exhibit 10.11 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2004.
Incorporated by reference herein to Exhibit 10.12 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2004.
Incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2005.
Incorporated by reference herein to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2005.
Incorporated by reference herein to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2005.
Incorporated by reference herein to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2005.
Incorporated by reference herein to Exhibit 2.1 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2005.
Incorporated by reference herein to Exhibit 2.2 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2005.
Incorporated by reference herein to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2005.
Incorporated by reference herein to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2005.
Incorporated by reference herein to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2005.
Incorporated by reference herein to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2005.
Incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2006.
Incorporated by reference herein to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated as of
April 18, 2006.
Incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2006.
Incorporated by reference herein to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2006
Incorporated by reference herein to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2006.
Incorporated by reference herein to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2006.
Incorporated by reference herein to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2006.
Incorporated by reference herein to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated as of
September 27, 2006.
Incorporated by reference herein to Exhibit 2.1 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2006.
Incorporated by reference herein to Exhibit 10.31 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2006.
Incorporated by reference herein to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated as of
October 19, 2007.
Incorporated by reference herein to Exhibit 2.5 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2007.
Incorporated by reference herein to Exhibit 2.6 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2007.
Incorporated by reference herein to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2007.

71

(33)

(34)

(35)

(36)

(37)

(38)

(39)

(40)

(41)

(42)

(43)

(44)

(45)

(46)

(47)

(48)

(49)

(50)

(51)

Incorporated by reference herein to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2007.
Incorporated by reference herein to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated as of
December 12, 2007.
Incorporated by reference herein to Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2007.
Incorporated by reference herein to Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2007.
Incorporated by reference herein to Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2007.
Incorporated by reference herein to Exhibit 10.11 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2007.
Incorporated by reference herein to Exhibit 10.12 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2007.
Incorporated by reference herein to Exhibit 10.13 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2007.
Incorporated by reference herein to Exhibit 10.24 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2007.
Incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2008.
Incorporated by reference herein to Exhibit A to the Company’s Definitive Proxy Statement filed with the
Commission on April 29, 2008.
Incorporated by reference herein to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2008.
Incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2008.
Incorporated by reference herein to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2008.
Incorporated by reference herein to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2008.
Incorporated by reference herein to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2008.
Incorporated by reference herein to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2008.
Incorporated by reference herein to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2008.
Incorporated by reference herein to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2008.

(b) Exhibits.

The Company hereby files as part of this Annual Report on Form 10-K for the year ended December 31,

2007, the exhibits listed in Item 15(a)(3) above. Exhibits which are incorporated herein by reference can be
inspected and copied at the public reference facilities maintained by the Securities and Exchange Commission,
100 F Street, N.E., Washington, D.C., 20549 and at the Commission’s regional offices at 175 W. Jackson
Boulevard, Suite 900, Chicago, IL 60604 and 3 World Financial Center, Suite 400, New York, NY 10281-1022.

(c) Financial Statement Schedule.

The Company hereby files as part of this Annual Report on Form 10-K for the year ended December 31,

2008 the consolidated financial statement schedule listed in Item 15(a)(2) above, which is attached hereto.

72

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant

has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in Fort
Lauderdale, Florida on the 27th day of February, 2009.

CITRIX SYSTEMS, INC

By:

/s/ MARK B. TEMPLETON

Mark B. Templeton
President and Chief Executive Officer

POWER OF ATTORNEY AND SIGNATURES

We, the undersigned officers and directors of Citrix Systems, Inc., hereby severally constitute and appoint

Mark B. Templeton and David J. Henshall, and each of them singly, our true and lawful attorneys, with full
power to them and each of them singly, to sign for us in our names in the capacities indicated below, all
amendments to this report, and generally to do all things in our names and on our behalf in such capacities to
enable Citrix Systems, Inc. to comply with the provisions of the Securities Exchange Act of 1934, as amended,
and all requirements of the Securities and Exchange Commission.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by

the following persons on behalf of the registrant and in the capacities indicated below on the 27th day of
February, 2009.

Signature

Title(s)

/s/ MARK B. TEMPLETON

Mark B. Templeton

/s/ DAVID J. HENSHALL

David J. Henshall

/s/ THOMAS F. BOGAN

Thomas F. Bogan

/s/ NANCI CALDWELL

Nanci Caldwell

/s/ MURRAY J. DEMO

Murray J. Demo

/s/ STEPHEN M. DOW

Stephen M. Dow

/s/ ASIFF S. HIRJI

Asiff S. Hirji

/s/ GARY E. MORIN

Gary E. Morin

/s/ GODFREY R. SULLIVAN

Godfrey R. Sullivan

President, Chief Executive Officer and Director
(Principal Executive Officer)

Chief Financial Officer and Senior Vice President,
Finance (Principal Financial and Accounting Officer)

Chairman of the Board of Directors

Director

Director

Director

Director

Director

Director

73

CITRIX SYSTEMS, INC.

List of Financial Statements and Financial Statement Schedule

The following consolidated financial statements of Citrix Systems, Inc. are included in Item 8:

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Balance Sheets—December 31, 2008 and 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Income—Years ended December 31, 2008, 2007 and 2006 . . . . . . . . . . .

Consolidated Statements of Stockholders’ Equity and Comprehensive Income—Years ended

December 31, 2008, 2007 and 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows—Years ended December 31, 2008, 2007 and 2006 . . . . . . . .

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-2

F-3

F-4

F-5

F-7

F-8

The following consolidated financial statement schedule of Citrix Systems, Inc. is included in Item 15(a):

Schedule II Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-41

All other schedules for which provision is made in the applicable accounting regulation of the Securities and
Exchange Commission are not required under the related instructions or are inapplicable and therefore have been
omitted.

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Citrix Systems, Inc.

We have audited the accompanying consolidated balance sheets of Citrix Systems, Inc. as of December 31, 2008
and 2007, and the related consolidated statements of income, stockholders’ equity and comprehensive income,
and cash flows for each of the three years in the period ended December 31, 2008. Our audits also included the
financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Citrix Systems, Inc. at December 31, 2008 and 2007, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended December 31, 2008, in conformity
with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.

As discussed in Note 2 to the consolidated financial statements, Citrix Systems, Inc. changed its method of
accounting for uncertain tax positions as of January, 1, 2007.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), Citrix Systems, Inc.’s internal control over financial reporting as of December 31, 2008, based
on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 24, 2009 expressed an unqualified
opinion thereon.

/s/ Ernst & Young LLP

Certified Public Accountants

Fort Lauderdale, Florida
February 24, 2009

F-2

CITRIX SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

Current assets:

Assets

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments - available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net of allowances of $8,702 and $4,561 in 2008 and 2007,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash equivalents and available-for-sale investments . . . . . . . . . . . . . . . . . .
Long-term investments - trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term investments - available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term portion of deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2008

2007

(In thousands, except par value)

$

326,121
249,175

$

223,749
356,085

231,296
11,226
84,530
37,792

940,140
883
37,919
237,666
254,334
904,504
270,222
12,936
35,702

225,861
9,629
75,995
43,026

934,345
63,735
—

218,676
134,907
888,516
276,315
—
18,199

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,694,306

$ 2,534,693

Current liabilities:

Liabilities and Stockholders’ Equity

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of deferred revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term portion of deferred revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies
Stockholders’ equity:

Preferred stock at $.01 par value: 5,000 shares authorized, none issued and

$

46,672
195,550
488,695

730,917
44,780
744

55,586
191,383
407,305

654,274
35,381
6,713

outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

—

Common stock at $.001 par value: 1,000,000 shares authorized; 255,755 and

252,201 shares issued at 2008 and 2007, respectively . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . .

256
2,305,187
1,387,067
(15,852)

252
2,038,010
1,208,791
5,751

3,676,658

3,252,804

Less - common stock in treasury, at cost (75,699 and 64,841 shares in 2008 and
2007, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,758,793)

(1,414,479)

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,917,865

1,838,325

$ 2,694,306

$ 2,534,693

See accompanying notes.

F-3

CITRIX SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF INCOME

Year Ended December 31,

2008

2007

2006

(In thousands, except per share information)

Revenues:

Product licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
License updates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Online services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Technical services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 620,215
559,340
260,065
143,734

$ 577,144
484,669
213,744
116,385

$ 488,487
405,756
148,795
91,281

Total net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,583,354

1,391,942

1,134,319

Cost of net revenues:

Cost of product license revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of services revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of product related intangible assets . . . . . . . . . . . . . . .

47,801
79,303
48,028

42,984
65,027
29,596

Total cost of net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

175,132

137,607

32,911
46,585
19,202

98,698

Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:

1,408,222

1,254,335

1,035,621

Research and development
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales, marketing and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of other intangible assets . . . . . . . . . . . . . . . . . . . . . . .
In-process research and development . . . . . . . . . . . . . . . . . . . . . . . .

288,109
669,569
256,679
22,724
1,140

205,103
590,409
229,229
17,387
9,800

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,238,221

1,051,928

Income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

170,001
31,506
(444)
(4,140)

196,923
18,647

202,407
49,704
(737)
(466)

250,908
36,425

155,331
480,343
178,669
16,934
1,000

832,277

203,344
41,210
(927)
(546)

243,081
60,084

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 178,276

$ 214,483

$ 182,997

Earnings per share:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

0.97

0.96

$

$

1.18

1.14

$

$

1.01

0.97

Weighted average shares outstanding:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

183,023

181,501

180,992

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

186,682

187,380

187,725

See accompanying notes.

F-4

CITRIX SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME
(In thousands)

Balance at December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued under stock-based compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock issued under employee stock purchase plan . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock issued related to acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit from employer stock plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-off of deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid in advance for stock repurchase contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Donated treasury shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain on forward contracts net of reclassification adjustments and net of taxes . . .
Unrealized gain on available-for-sale securities, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance at December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact of adoption of FIN No. 48 on accumulated retained earnings on January 1, 2007 . . . .
Shares issued under stock-based compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock issued under employee stock purchase plan . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit from employer stock plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock issued related to acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tender offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid in advance for stock repurchase contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain on forward contracts net of reclassification adjustments, net of taxes . . . . . .
Unrealized gain on available-for-sale securities, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued under stock-based compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock issued under employee stock purchase plan . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit from employer stock plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock repurchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized loss on forward contracts net of reclassification adjustments and net of taxes . . . .
Unrealized loss on available-for-sale securities, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Common Stock

Shares

Amount

226,573
11,245
—
339
(1)

—
—
—
—
—
—
—
—

238,156

—
6,788
—
198
—
7,059
—
—
—
—
—
—

252,201
3,132
—
422
—
—
—
—
—

$226
11

—
—
—
—
—
—
—
—
—
—
—

238*
—

7

—
—
—
7

—
—
—
—
—
—

252
3

—

1

—
—
—
—
—

Additional
Paid In
Capital

$1,323,969
221,736
60,713
8,909
290
40,600
(21,417)
57,074
(36,344)
—
—
—
—

1,655,530
—
113,002
64,666
5,386
15,529
232,268
40,000
(515)
(87,856)
—
—
—

2,038,010
44,369
122,293
12,519
140
87,856
—
—
—

Balance at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

255,755

$256

$2,305,187

* Amounts do not add due to rounding.

See accompanying notes.

F-5

Retained
Earnings

$823,709
—
—
—
—
—
—
—
—
—
—
—
182,997

1,006,706
(12,398)
—
—
—
—
—
—
—
—
—
—
214,483

1,208,791
—
—
—
—
—
—
—
178,276

Accumulated
Other
Comprehensive
Income (Loss)

$ (4,463)

—
—
—
—
—
—
—
—
—
8,406
237
—

4,180
—
—
—
—
—
—
—
—
—
1,521
50
—

5,751
—
—
—
—
—
(8,416)
(13,187)
—

Deferred
Compensation

$(21,417)*
—
—
—
—
—
21,417
—
—
—
—
—
—

—
—
—
—
—
—
—
—
—
—
—
—
—

—
—
—
—
—
—
—
—
—

Common Stock
in Treasury

Shares

Amount

(49,965)
—
—
—
—
—
—
(9,501)
—

1

—
—
—

(59,465)
—
—
—
—
—
—
(5,376)
—
—
—
—
—

(64,841)
—
—
—
—
(10,858)
—
—
—

$ (907,496)

—
—
—
—
—
—

(294,891)

—
22
—
—
—

(1,202,365)

—
—
—
—
—
—

(212,114)

—
—
—
—
—

(1,414,479)

—
—
—
—

(344,314)

—
—
—

Total
Stockholders’
Equity

$1,214,528*
221,747
60,713
8,909
290
40,600
—

(237,817)
(36,344)
22
8,406
237
182,997

1,464,289*
(12,398)
113,009
64,666
5,386
15,529
232,275
(172,114)
(515)
(87,856)
1,521
50
214,483

1,838,325
44,372
122,293
12,520
140
(256,458)
(8,416)
(13,187)
178,276

$1,387,067

$(15,852)

$ —

(75,699)

$(1,758,793)

$1,917,865

Total
Comprehensive
Income

$

8,406
237
182,997

$191,640

$

1,521
50
214,483

$216,054

$ (8,416)
(13,187)
178,276

$156,673

F-6

CITRIX SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Operating activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided by operating activities:

Year Ended December 31,

2008

2007
(In thousands)

2006

$ 178,276

$ 214,483

$ 182,997

Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In-process research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (gain) on available-for-sale investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit related to adjustment of payroll taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for product returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for inventory reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax effect of stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Excess tax benefit from exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign

currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-cash items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

70,752
52,954
124,615
1,140
1,265
(6,428)
1,613
2,103
674
(6,843)
140
(5,559)

46,983
38,214
65,491
9,800
—
—
2,578
3,517
3,351
(634)
15,529
(17,753)

36,136
27,447
61,596
1,000
(93)
—
1,978
4,608
3,584
(4,351)
40,600
(51,915)

1,041
2,940

(142)
2,231

(1,662)
571

Total adjustments to reconcile net income to net cash provided by operating activities . . . . .

240,407

169,165

119,499

Changes in operating assets and liabilities, net of effects of acquisitions:

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10,975)
(2,271)
2,615
(10,335)
1,206
(6,808)
(15,337)
—
90,789
(5,460)

(19,645)
(6,316)
(24,157)
(6,829)
63,397
5,382
14,340
(12,239)
86,815
(62,121)

(68,187)
(5,869)
(10,523)
(2,774)
11,394
7,791
12,679
10,936
69,599
(219)

Total changes in operating assets and liabilities, net of effects of acquisitions . . . . . . . . . . . .

43,424

38,627

24,827

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing activities
Purchases of available for-sale investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of available-for-sale investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from maturities of available-for-sale investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for licensing agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities
Proceeds from issuance of common stock under stock-based compensation plans . . . . . . . . . . . . . . . . .
Excess tax benefit from exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock repurchases, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments on debt

462,107

422,275

327,323

(591,919)
333,945
348,839
(181,046)
(28,023)
(40,418)

(639,414)
153,759
305,278
(85,919)
(148,055)
(3,250)

(709,565)
170,503
215,318
(52,051)
(61,462)
—

(158,622)

(417,601)

(437,257)

44,372
5,559
(256,458)
(407)

118,395
17,753
(259,970)
(8,000)

230,656
51,915
(274,161)
(34,850)

Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(206,934)

(131,822)

(26,440)

Effect of exchange rate changes on cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,821
102,372
223,749

1,843
(125,305)
349,054

1,393
(134,981)
484,035

Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 326,121

$ 223,749

$ 349,054

Supplemental Cash Flow Information
Non-cash financing activity—Fair value of stock issued in connection with acquisitions . . . . . . . . . . . .

$

— $ 232,275

Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 28,591

$ 43,064

Cash paid for interest

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

196

$

247

$

$

$

290

2,330

432

See accompanying notes.

F-7

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION

Citrix Systems, Inc. (“Citrix” or the “Company”), is a Delaware corporation founded on April 17, 1989. The
Company designs, develops and markets technology solutions that allow applications to be delivered, supported,
and shared on-demand with high performance, enhanced security, and improved total cost of ownership. The
Company markets and licenses its products through multiple channels such as value-added resellers, channel
distributors, system integrators, independent software vendors, its Websites and original equipment
manufacturers.

2. SIGNIFICANT ACCOUNTING POLICIES

Consolidation Policy

The consolidated financial statements of the Company include the accounts of its wholly-owned subsidiaries

in the Americas, Europe, the Middle East and Africa (“EMEA”), Asia-Pacific and the Online Services division.
All significant transactions and balances between the Company and its subsidiaries have been eliminated in
consolidation.

Cash and Cash Equivalents

Cash and cash equivalents at December 31, 2008 and 2007 consist of marketable securities, which are

primarily commercial paper, agency securities, money market funds, corporate securities and municipal
securities with initial or remaining contractual maturities when purchased of three months or less.

Restricted Cash Equivalents and Investments

Restricted cash equivalents and available-for-sale investments at December 31, 2007 were primarily

comprised of $62.8 million in investment securities and cash equivalents pledged as collateral for specified
obligations under the Company’s synthetic lease arrangement related to the Company’s corporate headquarters in
Fort Lauderdale, Florida. Effective October 23, 2008, the Company purchased its corporate headquarters and
terminated its synthetic lease arrangement. See Note 10 for additional information regarding the Company’s
off-balance sheet arrangement.

Investments

Short-term and long-term investments at December 31, 2008 and 2007 primarily consist of agency
securities, corporate securities, municipal securities, government securities and commercial paper. Investments
classified as trading securities are stated at fair value with unrealized gains and losses reported in earnings.
Investments classified as available-for-sale are stated at fair value with unrealized gains and losses, net of taxes,
reported in accumulated other comprehensive (loss) income. Investments classified as held-to-maturity are stated
at amortized cost. The Company classifies its available-for-sale investments as current and non-current based on
their actual remaining time to maturity. The Company does not recognize changes in the fair value of its
available-for-sale investments in income unless a decline in value is considered other-than-temporary in
accordance with the Financial Accounting Standards Board (the “FASB”) Staff Position 115-1, The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments.

The Company’s investment policy is designed to limit exposure to any one issuer depending on credit

quality. The Company uses information provided by third parties to adjust the carrying value of certain of its
investments and derivative instruments to fair value at the end of each period. Fair values are based on valuation
models that use market quotes and, for certain investments, assumptions as to the creditworthiness of the entities
issuing those underlying instruments.

F-8

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounts Receivable

The Company’s accounts receivable are due primarily from value-added resellers, distributors and end

customers. Collateral is not required. Product returns are provided for in the consolidated financial statements
and have historically been within management’s expectations. The Company also maintains allowances for
doubtful accounts for estimated losses resulting from the inability of the Company’s customers to make
payments. The Company periodically reviews these estimated allowances, including an analysis of the
customers’ payment history and creditworthiness. The allowance for doubtful accounts was $7.1 million and $2.9
million as of December 31, 2008 and 2007, respectively. If the financial condition of a significant distributor or
customer were to deteriorate, the Company’s operating results could be adversely affected. No distributor or
end-customer accounted for more than 10% of gross accounts receivable at December 31, 2008 or 2007.

Inventory

Inventories are stated at the lower of cost or market on an average cost method and primarily consist of

finished goods as of December 31, 2008 and 2007.

Property and Equipment

Property and equipment is stated at cost. Depreciation is computed using the straight-line method over the

estimated useful lives of the assets, which is generally three years for computer equipment, software, office
equipment and furniture, the lesser of the lease term or five years for leasehold improvements, which is the
estimated useful life, seven years for the Company’s enterprise resource planning system and 40 years for
buildings.

During 2008 and 2007, the Company retired $12.5 million and $6.8 million, respectively, in property and
equipment that were no longer in use. At the time of retirement, the remaining net book value of these assets was
immaterial and no material asset retirement obligations were associated with them.

Property and equipment consist of the following:

Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer equipment
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equipment and furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31,

2008

2007

(In thousands)

$ 72,100
153,180
129,114
30,474
86,593
15,884

$ 17,781
116,632
90,105
27,224
64,188
9,062

487,345
(233,011)

324,992
(190,085)

$ 254,334

$ 134,907

Long-Lived Assets

The Company reviews for impairment of long-lived assets and certain identifiable intangible assets to be
held and used whenever events or changes in circumstances indicate that the carrying amount of such assets may
not be fully recoverable. Determination of recoverability is based on an estimate of undiscounted future cash

F-9

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss is based
on the fair value of the asset compared to its carrying value. Long-lived assets and certain identifiable intangible
assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

During 2008, 2007 and 2006, the Company did not recognize any impairment charges associated with its

long-lived or intangible assets.

Goodwill

The Company accounts for goodwill in accordance with SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 142, requires that goodwill and certain intangible assets are not amortized, but are subject to an
annual impairment test. There was no impairment of goodwill as a result of the annual impairment tests
completed during the fourth quarters of 2008 and 2007. Excluding goodwill, the Company has no intangible
assets deemed to have indefinite lives. See Note 3 for acquisitions and Note 12 for segment information.

The following table presents the change in goodwill allocated to the Company’s reportable segments during

2008 and 2007 (in thousands):

Balance at
January 1,
2008

Acquisitions Other

Balance at
December 31,
2008

Balance at
January 1,
2007

Acquisitions Other

Balance at
December 31,
2007

Americas(1) . . . . . . . . . . . $652,107 $ 1,624 $(5,607)(3) $648,124 $468,281 $184,486 $(660) $652,107
62,000
EMEA(2) . . . . . . . . . . . . .
Asia-Pacific . . . . . . . . . .
11,000
Online Services

62,000 —
11,000 —

62,000
11,000

62,000
11,000

—
—

—
—

—
—

division . . . . . . . . . . .

163,409

19,971

—

183,380

163,409

—

— 163,409

Consolidated . . . . . . . . . $888,516 $21,595 $(5,607)

$904,504 $631,690 $257,486 $(660) $888,516

(1)

The Americas segment is comprised of the United States, Canada and Latin America.

(2) Defined as Europe, the Middle East and Africa.
(3) Amount primarily consists of adjustments made to deferred taxes related to the acquisition of XenSource.

Intangible Assets

The Company has intangible assets which were primarily acquired in conjunction with business

combinations and technology purchases. Intangible assets with finite lives are recorded at cost, less accumulated
amortization. Amortization is recognized on a straight-line basis over the estimated useful lives of the respective
assets, generally three to seven years, except for patents, which are amortized over the lesser of their remaining
life or ten years. In accordance with SFAS No. 86, Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed, the Company records acquired product related intangible assets at net realizable
value and reviews this technology for impairment on a periodic basis by comparing the estimated net realizable
value to the unamortized cost of the technology. As of December 31, 2008 the Company had $40.0 million in
unamortized product related intangibles and recorded $8.4 million in amortization during the year ended
December 31, 2008 related to assets recorded under SFAS No. 86. There has been no impairment of these assets
for any of the periods presented.

F-10

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Intangible assets consist of the following (in thousands):

December 31, 2008

Gross Carrying
Amount

Accumulated
Amortization

Weighted Average
Life

Product related intangible assets . . . . . . . . . . . . . . . .
Other intangible assets . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

314,383
163,896

478,279

$

$

128,682
79,375

208,057

5.88 years
6.06 years

5.94 years

December 31, 2007

Gross Carrying
Amount

Accumulated
Amortization

Weighted Average
Life

Product related intangible assets . . . . . . . . . . . . . . . .
Other intangible assets . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

260,937
154,724

415,661

$

$

83,633
55,713

139,346

6.06 years
6.19 years

6.11 years

Other intangible assets consist primarily of customer relationships, trade names, covenants not to compete

and patents. Amortization of product related intangible assets includes amortization of product related
technologies and patents and is reported as a cost of net revenues in the accompanying consolidated statements of
income. Amortization of other intangible assets includes amortization of customer relationships, trade names and
covenants not to compete and is reported as an operating expense in the accompanying consolidated statements
of income.

Estimated future annual amortization expense is as follows (in thousands):

Year ending December 31,

2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 65,186
57,654
46,015
30,825
24,937

Software Development Costs

SFAS No. 86, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed,

requires certain internal software development costs to be capitalized upon the establishment of technological
feasibility. Software development costs incurred subsequent to achieving technological feasibility have not been
significant and substantially all software development costs have been expensed as incurred.

The Company accounts for software developed for internal use pursuant to the American Institute of
Certified Public Accountants Statement of Position (“SOP”) No. 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. Pursuant to SOP No. 98-1, the Company capitalizes external
direct costs of materials and services used in the project and internal costs such as payroll and benefits of those
employees directly associated with the development of internal use software and software developed related to its
online service offerings. The amount of costs capitalized in 2008 and 2007 relating to internal use software was
$41.0 million and $26.3 million, respectively. These costs are being amortized over the estimated useful life of
the software, which is generally three to seven years, and are included in property and equipment in the
accompanying consolidated balance sheets.

F-11

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognition

The Company markets and licenses products primarily through multiple channels such as value-added
resellers, channel distributors, system integrators, independent software vendors, its Websites and original
equipment manufacturers. The Company’s product licenses are generally perpetual. The Company also
separately sells license updates and services, which may include product training, technical support and
consulting services, as well as online services.

The Company’s software products are purchased by small and medium-sized businesses, with a minimal
number of locations, and larger business enterprises with more complex multiserver environments that deploy the
Company’s software products on a departmental or enterprise-wide basis. Products may be delivered indirectly
by channel distributors or original equipment manufacturers or directly to the end-user by the Company via
packaged product or download from the Company’s Website. The Company’s appliance products are integrated
with software that is essential to the functionality of the equipment. The Company provides license updates for
appliances, which include unspecified software upgrades and enhancements through its maintenance contracts.
Accordingly, for these appliances, the Company accounts for revenue in accordance with SOP No. 97-2,
“Software Revenue Recognition, (as amended by SOP 98-4 and SOP 98-9)” and all related interpretations, as
described in detail below. The Company’s online services are purchased by small and medium-sized businesses,
as well as individuals, and are centrally hosted on the Company’s Websites.

Revenue is recognized when it is earned. The Company’s software revenue recognition policies are in
compliance with SOP 97-2 and related amendments and interpretations. In addition, the Company’s online
services are considered service arrangements in accordance with EITF Issue No. 00-3, Application of AICPA
Statement of Position 97-2, Software Revenue Recognition, to Arrangements That Include the Right to Use
Software Stored on Another Entity’s Hardware. In addition, because the Company provides these applications as
an online service, the Company follows the provisions of Securities and Exchange Commission Staff Accounting
Bulletin (“SAB”) No. 104, Revenue Recognition.

The Company recognizes revenue when all of the following criteria are met: persuasive evidence of the
arrangement exists; delivery has occurred and the Company has no remaining obligations; the fee is fixed or
determinable; and collectability is probable. The Company defines these four criteria as follows:

• Persuasive evidence of the arrangement exists. The Company recognizes revenue on packaged
products and appliances upon shipment to distributors and resellers. For packaged product and
appliance sales, it is the Company’s customary practice to require a purchase order from distributors
and resellers who have previously negotiated a master packaged product distribution or resale
agreement. For electronic and paper license arrangements, the Company typically requires a purchase
order from the distributor, reseller or end-user (depending on the arrangement) and an executed product
license agreement from the end-user. For technical support, product training and consulting services,
the Company requires a purchase order and an executed agreement. For online services, the Company
requires the customer or the reseller to electronically accept the terms of an online services agreement
or execute a contract.

• Delivery has occurred and the Company has no remaining obligations. For product license and
appliance sales, the Company’s standard delivery method is free-on-board shipping point.
Consequently, it considers delivery of packaged products and appliances to have occurred when the
products are shipped pursuant to an agreement and purchase order. The Company considers delivery of
licenses under electronic licensing agreements to have occurred when the related products are shipped
and the end-user has been electronically provided the software activation keys that allow the end-user
to take immediate possession of the product. For online services, delivery begins when the login id and
password have been provided to the customer. For product training and consulting services, the

F-12

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company fulfills its obligation when the services are performed. For license updates, technical support
and online services, the Company assumes that its obligation is satisfied ratably over the respective
terms of the agreements, which are typically 12 to 24 months.

•

The fee is fixed or determinable. In the normal course of business, the Company does not provide
customers the right to a refund of any portion of their license fees or extended payment terms. The
Company sells license updates and services, which includes technical support, product training and
consulting services separately and it determines vendor specific objective evidence (“VSOE”) of fair
value by the price charged for each of these items when sold separately or based on applicable renewal
rates. For online services, the fee is considered fixed or determinable if it is not subject to refund or
adjustment.

• Collectability is probable. The Company determines collectability on a customer-by-customer basis
and generally does not require collateral. The Company typically sells product licenses and license
updates to distributors or resellers for whom there are histories of successful collection. New customers
are subject to a credit review process that evaluates their financial position and ultimately their ability
to pay. Customers are also subject to an ongoing credit review process. If the Company determines
from the outset of an arrangement that collectability is not probable, revenue recognition is deferred
until customer payment is received and the other parameters of revenue recognition described above
have been achieved. Management’s judgment is required in assessing the probability of collection,
which is generally based on evaluation of customer specific information, historical experience and
economic market conditions.

Net revenues include the following categories: Product Licenses, License Updates, Online Services and
Technical Services. Product Licenses primarily represent fees related to the licensing of the Company’s software
and appliance products. These revenues are reflected net of sales allowances, cooperative advertising agreements
and provisions for stock balancing return rights. License Updates consist of fees related to the Subscription
Advantage program that are recognized ratably over the term of the contract, which is typically 12-24 months.
Subscription Advantage is a renewable program that provides subscribers with immediate access to software
upgrades, enhancements and maintenance releases when and if they become available during the term of the
contract. Online Services revenues consist primarily of fees related to online service agreements, including set up
fees, and are recognized ratably over the contract term or over the expected customer life. Technical Services
revenues are comprised of fees from technical support services which are recognized ratably over the contract
term as well as revenues from product training and certification, and consulting services revenue related to
implementation of the Company’s products, which is recognized as the services are provided.

The Company licenses most of its software products bundled with a one year contract for license updates

that provide the end-user with unspecified enhancements and upgrades to the licensed product on a when and if
available basis. Customers may also elect to purchase subscriptions for license updates, when not bundled with
the initial product purchase. Technical support, product training or consulting services may be purchased
separately by the customer. Online services are sold separately. The Company allocates revenue to license
updates and any other undelivered elements of the arrangement based on VSOE of fair value of each element and
such amounts are deferred until the applicable delivery criteria and other revenue recognition criteria described
above have been met. The balance of the revenue, net of any discounts inherent in the arrangement, is recognized
at the outset of the arrangement using the residual method as the product licenses are delivered. If management
cannot objectively determine the fair value of each undelivered element based on the VSOE of fair value,
revenue recognition is deferred until all elements are delivered, all services have been performed, or until fair
value can be objectively determined.

F-13

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In the normal course of business, the Company is not obligated to accept product returns from its

distributors under any conditions, unless the product item is defective in manufacture, but it does provide most of
its distributors with stock balancing and price protection rights. Stock balancing rights permit distributors to
return products to the Company up to the forty-fifth day of the fiscal quarter, subject to ordering an equal dollar
amount of its other products prior to the last day of the same fiscal quarter. Price protection rights require that the
Company grants retroactive price adjustments for inventories of its products held by distributors or resellers if it
lowers its prices for such products. Product items returned to the Company under the stock balancing program
must be in new, unused and unopened condition. The Company establishes provisions for estimated returns for
stock balancing and price protection rights, as well as other sales allowances, concurrently with the recognition
of revenue. The provisions are established based upon consideration of a variety of factors, including, among
other things, recent and historical return rates for both specific products and distributors, estimated distributor
inventory levels by product, the impact of any new product releases and projected economic conditions. Actual
product returns for stock balancing and price protection provisions incurred are, however, dependent upon future
events, including the amount of stock balancing activity by distributors and the level of distributor inventories at
the time of any price adjustments. The Company continually monitors the factors that influence the pricing of its
products and distributor inventory levels and makes adjustments to these provisions when it believes actual
returns and other allowances could differ from established reserves. The Company’s ability to recognize revenue
upon shipment to distributors is predicated on its ability to reliably estimate future stock balancing returns. If
actual experience or changes in market conditions impair the Company’s ability to estimate returns, it would be
required to defer the recognition of revenue until the delivery of the product to the end-user. Allowances for
estimated product returns amounted to approximately $1.6 million and $1.7 million at December 31, 2008 and
December 31, 2007, respectively. The Company has not reduced and has no current plans to reduce its prices for
inventory currently held by distributors. Accordingly, there were no reserves required for price protection at
December 31, 2008 and December 31, 2007. The Company also records estimated reductions to revenue for
customer programs and incentive offerings including volume-based incentives. The Company could take actions
to increase its customer incentive offerings, which could result in an incremental reduction to revenue at the time
the incentive is offered.

Product Concentration

The Company derives a substantial portion of its revenues from its XenApp products and anticipates that

this product and future derivative products and product lines based upon this technology will continue to
constitute a majority of its revenue. The Company could experience declines in demand for its XenApp and other
products, whether as a result of general economic conditions, the delay or reduction in technology purchases,
new competitive product releases, price competition, lack of success of its strategic partners, technological
change or other factors.

Cost of Net Revenues

Cost of product license revenues consists primarily of hardware, product media and duplication, manuals,
packaging materials, shipping expense, server capacity costs and royalties. In addition, the Company is a party to
licensing agreements with various entities, which give the Company the right to use certain software code in its
products or in the development of future products in exchange for the payment of fixed fees or amounts based
upon the sales of the related product. The licensing agreements generally have terms ranging from one to five
years, and generally include renewal options. However, some agreements may be perpetual unless expressly
terminated. Royalties and other costs related to these agreements are included in cost of net revenues. Cost of
services revenue consists primarily of compensation and other personnel-related costs of providing technical
support and consulting, as well as the Company’s online services. Also included in cost of net revenues is

F-14

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

amortization of product related intangible assets which includes acquired core and product technology and
associated patents.

Foreign Currency

The functional currency for substantially all of the Company’s wholly-owned foreign subsidiaries is the
U.S. dollar. Monetary assets and liabilities of the subsidiaries are remeasured into U.S. dollars at exchange rates
in effect at the balance sheet date, and revenues and expenses are remeasured at average rates prevailing during
the year. Remeasurement and foreign currency transaction (losses) gains of approximately $(6.0) million, $0.6
million and $(0.2) million for the years ended December 31, 2008, 2007, and 2006, respectively, are included in
other expense, net, in the accompanying consolidated statements of income.

Derivatives and Hedging Activities

In accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and its

related interpretations and amendments, the Company records derivatives as either assets or liabilities on the
balance sheet and measures those instruments at fair value. For derivatives that are designated as and qualify as
effective cash flow hedges, the portion of gain or loss on the derivative instrument effective at offsetting changes
in the hedged item is reported as a component of accumulated other comprehensive income (loss) and
reclassified into earnings as operating expense, net, when the hedged transaction affects earnings. For derivative
instruments that are designated as and qualify as effective fair value hedges, the gain or loss on the derivative
instrument as well as the offsetting gain or loss on the hedged item attributable to the hedged risk is recognized in
current earnings as interest income or interest expense during the period of the change in fair values. Derivatives
not designated as hedging instruments are adjusted to fair value through earnings as other expense, net, in the
period the changes in fair value occur. The application of the provisions of SFAS No. 133 could impact the
volatility of earnings.

The Company formally documents all relationships between hedging instruments and hedged items, as well
as its risk-management objective and strategy for undertaking various hedge transactions. This process includes
attributing all derivatives that are designated as cash flow hedges to floating rate assets or liabilities or forecasted
transactions and attributing all derivatives that are designated as fair value hedges to fixed rate assets or
liabilities. The Company also formally assesses, both at the inception of the hedge and on an ongoing basis,
whether each derivative is highly effective in offsetting changes in cash flows or fair value of the hedged item.
Fluctuations in the value of the derivative instruments are generally offset by changes in the hedged item;
however, if it is determined that a derivative is not highly effective as a hedge or if a derivative ceases to be a
highly effective hedge, the Company will discontinue hedge accounting prospectively for the affected derivative.

The Company is exposed to risk of default by its hedging counterparties. Although this risk is concentrated

among a limited number of counterparties, the Company’s foreign exchange hedging policy attempts to minimize
it by placing limits on the net dollar amount of contracts that may be outstanding with any single financial
institution.

Advertising Costs

The Company expenses advertising costs as incurred. The Company has advertising agreements with, and
purchases advertising from, online media providers to advertise its online services products. The Company also
has cooperative advertising agreements with certain distributors and resellers whereby the Company will
reimburse distributors and resellers for qualified advertising of Citrix products. Reimbursement is made once the
distributor, reseller or provider provides substantiation of qualified expenses. The Company estimates the impact

F-15

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of these expenses and recognizes them at the time of product sales as a reduction of net revenue or as a
component of sales, marketing and services expenses in the accompanying consolidated statements of income.
The total costs the Company recognized related to advertising was approximately $84.6 million, $64.0 million
and $54.2 million, during the years ended December 31, 2008, 2007 and 2006, respectively.

Income Taxes

On January 1, 2007, the Company adopted the provisions of FASB Interpretation (“FIN”) No. 48,
Accounting for Uncertainty in Income Taxes. As a result of the implementation of FIN No. 48, the Company
recognized approximately a $12.4 million increase in the liability for unrecognized tax benefits, which was
accounted for as a reduction to the January 1, 2007 balance of retained earnings.

The Company and one or more of its subsidiaries is subject to United States federal income taxes, as well as

income taxes of multiple state and foreign jurisdictions. With few exceptions, the Company is no longer subject
to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years prior to 2004.
The Internal Revenue Service commenced an examination of the Company’s U.S. federal income tax returns for
2004 and 2005 in the third quarter of 2006.

The Company is required to estimate its income taxes in each of the jurisdictions in which it operates as part

of the process of preparing its consolidated financial statements. SFAS No. 109, Accounting for Income Taxes,
requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence,
it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company
reviews deferred tax assets periodically for recoverability and makes estimates and judgments regarding the
expected geographic sources of taxable income and gains from investments, as well as tax planning strategies in
assessing the need for a valuation allowance.

In the ordinary course of global business, there are transactions for which the ultimate tax outcome is
uncertain; thus, judgment is required in determining the worldwide provision for income taxes. The Company
provides for income taxes on transactions based on its estimate of the probable liability. The Company adjusts its
provision as appropriate for changes that impact its underlying judgments. Changes that impact provision
estimates include such items as jurisdictional interpretations on tax filing positions based on the results of tax
audits and general tax authority rulings. Due to the evolving nature of tax rules combined with the large number
of jurisdictions in which the Company operates, it is possible that its estimates of its tax liability and the
realizability of its deferred tax assets could change in the future, which may result in additional tax liabilities and
adversely affect the Company’s results of operations, financial condition and cash flows.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Significant estimates made by management include
the provision for doubtful accounts receivable, the provision to reduce obsolete or excess inventory to market, the
provision for estimated returns for stock balancing and price protection rights, as well as sales allowances, the
assumptions used in the valuation of stock-based awards, the valuation of the Company’s goodwill, net realizable
value of product related intangible assets, the provision for vacant facility costs, the provision for income taxes
and the amortization and depreciation periods for intangible and long-lived assets. While the Company believes
that such estimates are fair when considered in conjunction with the consolidated financial position and results of
operations taken as a whole, the actual amounts of such items, when known, will vary from these estimates.

F-16

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounting for Stock-Based Compensation

The Company has various stock-based compensation plans for its employees and outside directors. Effective

January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123R, Share-Based
Payment, and related interpretations using the modified-prospective transition method. Under that method,
compensation cost recognized in 2006 includes (a) compensation cost for all stock-based awards granted prior to,
but not yet vested as of January 1, 2006 based on the grant date fair value estimated in accordance with the
original provisions of SFAS No. 123 and (b) compensation cost for all stock-based awards granted on or
subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of
SFAS No. 123R. Results for prior periods have not been restated due to the adoption of SFAS No. 123R. See
Note 7 for further information regarding the Company’s stock-based compensation plans.

Earnings per Share

Basic earnings per share is calculated by dividing income available to stockholders by the weighted-average

number of common shares outstanding during each period. Diluted earnings per share is computed using the
weighted average number of common and dilutive common share equivalents outstanding during the period.
Dilutive common share equivalents consist of shares issuable upon the exercise of certain stock options
(calculated using the treasury stock method). Certain shares under the Company’s stock-based compensation
programs were excluded from the computation of diluted earnings per share due to their anti-dilutive effect for
the respective periods in which they were outstanding. The reconciliation of the numerator and denominator of
the earnings per share calculation is presented in Note 14.

Reclassifications

Certain reclassifications have been made for consistent presentation. The Company’s consolidated statement
of cash flows for the year ended December 31, 2008 includes the effect of a change in classification of cash flows
to separately disclose the effect of exchange rate changes on monetary assets and liabilities denominated in
foreign currencies, as well as the effect of exchange rate changes on cash and cash equivalents. This change was
incorporated into the Company’s consolidated statement of cash flows reporting processes for the first time in the
first quarter of 2008 due to materiality. Accordingly, the Company has made reclassifications to its consolidated
statement of cash flows for the years ended December 31, 2007 and 2006 to conform to its current period
presentation.

3. ACQUISITIONS

2008 Acquisition

In October 2008, the Company acquired all of the issued and outstanding securities of Vapps, Inc.
(“Vapps”), a privately held Delaware corporation headquartered in Hoboken, New Jersey. Vapps offers high
quality audio conferencing solutions to small and medium sized businesses and enterprise and service provider
markets that complement the Company’s online services products. The total consideration for this transaction
was approximately $26.4 million in cash, including $1.0 million in transaction costs. In addition, if certain
financial and operational milestones are achieved by the Vapps business, contingent consideration of up to
approximately $4.4 million may be earned. The sources of funds for this transaction consisted of available cash
and investments. In addition, the Company assumed approximately 0.1 million unvested stock options upon the
closing of the transaction.

Revenues from Vapps are included in the Company’s Online Services revenue. The Vapps results of
operations have been included in the Company’s consolidated results of operations beginning after the date of its

F-17

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

acquisition and are not significant in relation to the Company’s consolidated financial statements. Accordingly,
pro forma financial disclosures have not been presented.

Under the purchase method of accounting, the purchase price for Vapps was allocated to the acquired
company’s net tangible and intangible assets based on their estimated fair values as of the date of the completion
of the acquisition. The allocation of the total purchase price is summarized below (in thousands):

Purchase Price
Allocation

Asset
Life

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In-process research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

744
709 Various
420
1,140
10,750
19,971

3-8 years
Indefinite

Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

33,734
(3,175)
(4,201)

Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

26,358

Current assets acquired and current liabilities assumed in connection with Vapps consisted mainly of
accounts receivable and other accrued expenses. Other assets and non-current liabilities consisted primarily of
deferred taxes. The $20.0 million of goodwill related to Vapps was assigned to the Company’s Online Services
segment and is not deductible for tax purposes. See Note 12 for segment information.

Identifiable intangible assets related to Vapps, in thousands, and their weighted average lives are as follows

(in thousands):

Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Core technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,550
8,200

3.6 years
5.1 years

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$10,750

Weighted
Average Lives

2007 Acquisitions

During 2007, the Company acquired all of the issued and outstanding capital stock of two privately held

companies, Ardence Delaware Inc., a leading provider of solutions that allow information technology
administrators to set up and configure PCs, servers, and Web servers in real time from a centrally managed
source, and XenSource, Inc., a privately held leader in enterprise-grade virtual infrastructure solutions (the “2007
Acquisitions”). The 2007 Acquisitions positioned the Company in adjacent server and desktop virtualization
markets that will allow it to continue to extend its leadership in the broader Application Delivery Infrastructure
market. The total consideration for the 2007 Acquisitions was approximately $379.4 million, comprised of
approximately 7.1 million shares of the Company’s common stock valued at $232.3 million, $142.8 million in
cash and approximately $4.3 million in direct transaction costs. In addition, in connection with the 2007
Acquisitions, the Company issued approximately 1.3 million unvested shares of its common stock and

F-18

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

0.1 million non-vested stock units and assumed approximately 3.4 million stock options each of which will be
exercisable for the right to receive one share of the Company’s common stock upon vesting. Revenues from the
products acquired in the 2007 Acquisitions are primarily included in the Company’s Product License revenue.
The 2007 Acquisitions’ results of operations have been included in the Company’s consolidated results of
operations beginning after the date of the respective acquisitions. The source of funds for the cash consideration
paid in these transactions consisted of available cash and investments. In connection with the 2007 Acquisitions,
the Company allocated $251.6 million to goodwill, $112.3 million to product related intangible assets and $56.3
million to other intangible assets.

2006 Acquisitions

During 2006, the Company acquired all of the issued and outstanding capital stock of two privately held
companies, Reflectent Software, Inc., a provider of solutions to monitor the real-time performance of client-
server, Web and desktop applications from an end-user perspective, and Orbital Data Corporation, a provider of
solutions that optimize the delivery of applications over wide area networks (the “2006 Acquisitions”). The total
consideration for the 2006 Acquisitions was $68.0 million comprised of cash paid of $65.1 million and other
costs related primarily to direct transaction costs of $2.9 million, including approximately $0.3 million related to
stock-based awards that were granted and vested upon consummation of the acquisitions. As part of the 2006
Acquisitions, the Company assumed approximately 0.4 million non-vested stock-based awards upon the closing
of the transaction. Revenues from the acquired products are primarily included in the Company’s Product
License revenue and Technical Services revenue. The sources of funds for consideration paid in these
transactions consisted of available cash and investments. In connection with the 2006 Acquisitions, the Company
allocated $43.7 million to goodwill, $17.3 million to product related technology and $3.6 million to other
intangible assets.

In-process Research and Development

The fair values used in determining the purchase price allocation for certain intangible assets for the
Company’s acquisitions were based on estimated discounted future cash flows, royalty rates and historical data,
among other information. Purchased in-process research and development (“IPR&D”) of $1.1 million, $9.8
million and $1.0 million was expensed immediately upon the closing of the acquisition of Vapps, 2007
Acquisitions and 2006 Acquisitions, respectively, in accordance with FASB Interpretation No. 4, Applicability of
FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method, due to the fact that it
pertained to technology that was not currently technologically feasible, meaning it had not reached the working
model stage, did not contain all of the major functions planned for the product, was not ready for initial customer
testing and had no alternative future use. The fair value assigned to IPR&D was determined using the income
approach, which includes estimating the revenue and expenses associated with a project’s sales cycle and by
estimating the amount of after-tax cash flows attributable to the projects. The future cash flows were discounted
to present value utilizing an appropriate risk-adjusted rate of return, which ranged from 20% to 36%. The rate of
return included a factor that takes into account the uncertainty surrounding the successful development of the
IPR&D.

F-19

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. INVESTMENTS

Available-for-sale Investments

Investments in available-for-sale securities at fair value were as follows for the years ended December 31

(in thousands):

Description of the Securities

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair Value

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair Value

2008

2007

Agency securities . . . . . . . . . $258,574 $2,291
295
Corporate securities . . . . . . .
132
Municipal securities . . . . . . .
263
Government securities . . . . .
Commercial paper . . . . . . . .
9
Other . . . . . . . . . . . . . . . . . .
Money market funds . . . . . .

164,255
39,646
28,450
4,274
2,594
2,391

—
—

$ (1,074) $259,791 $134,203 $ 580
316
(14,775) 149,775
135
39,761
43
28,661
4,283
1
2,594
1,976

295,335
93,076
6,403
33,766
2,509
9,215

(17)
(52)
—
—
(415)

—
—

(492)
—

$(209) $134,574
295,159
93,211
6,442
33,766
2,509
9,100

—
(115)

(4)
(1)

Total . . . . . . . . . . . . . . . . . . . $500,184 $2,990

$(16,333) $486,841 $574,507 $1,075

$(821) $574,761

The change in net unrealized gains (losses) on available-for-sale securities recorded in other comprehensive

income includes unrealized gains (losses) that arose from changes in market value of specifically identified
securities that were held during the period and gains (losses) that were previously unrealized, but have been
recognized in current period net income due to sales or maturities of available-for-sale securities. This
reclassification has no effect on total comprehensive income or stockholders’ equity and was immaterial for all
periods presented.

At December 31, 2008, the Company’s short-term available-for-sale investments included $249.2 million

with an average original contractual maturity of approximately 18 months. The Company’s long-term
available-for-sale investments at December 31, 2008 included $235.1 million of investments with original
contractual maturities ranging from one to 40 years. As of December 31, 2008, The Company also held $2.6
million of long-term investments that were not due at a single maturity date. The average remaining maturities of
the Company’s short-term and long-term available-for-sale investments at December 31, 2008 were
approximately seven months and 11 years, respectively.

Unrealized Losses on Available-for-sale Investments

Less than 12 Months

12 Months or Greater

Total

Description of the Securities

Fair Value

Unrealized
Losses

Fair
Value

Unrealized
Losses

(In thousands)

Corporate bonds . . . . . . . . . . . . . . . . . . . . . . .
Agency securities . . . . . . . . . . . . . . . . . . . . . .

$ 99,535
59,319

$14,064
959

$6,969
2,645

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$158,854

$15,023

$9,614

$673
115

$788

Fair Value

$106,504
61,964

Unrealized
Losses

$14,737
1,074

$168,468

$15,811

The Company’s unrealized loss in Corporate Bonds is primarily comprised of an investment issued by AIG
Matched Funding Corporation (the “AIG Capped Floater”) with a face value of $50.0 million, which matures in
September 2011. American International Group, Inc. (“AIG”), as the issuer’s parent, provided a guarantee of the
security at the time of purchase in September 2006. The unrealized loss of $13.5 million was primarily caused by

F-20

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AIG experiencing liquidity challenges which were reportedly precipitated by problems in the capital markets.
AIG’s lack of liquidity triggered a downgrade in the credit ratings for its long-term issues to A- and A3 by two
rating agencies on October 3, 2008. As a result of AIG’s liquidity challenges, the Federal Reserve intervened
with a five year credit facility to help stabilize AIG and its effect on the overall market. To date, AIG has not
been reported to have defaulted on the terms of its loan from the Federal Reserve and continues to pay interest on
the AIG Capped Floater. Because the Company has the ability and intent to hold this security until a recovery of
fair value, which may not occur until maturity, it does not consider the security to be other-than-temporarily
impaired.

If AIG’s financial position further deteriorates, the Company may be required to further adjust the carrying

value of the AIG Capped Floater and potentially recognize an impairment charge for an other-than-temporary
decline in the fair value of the investment. Based on the Company’s available cash and other investments, it does
not currently anticipate that the lack of liquidity caused by holding the AIG Capped Floater to recovery will have
a material adverse effect on its financial position.

Net Losses on Available-for-sale Investments

Gross realized gains and losses on sales of available-for-sale investments during 2008 were $0.5 million and
$1.4 million, respectively. Gross realized gains and losses on sales of available-for-sale investments during 2007
and 2006 were not material. The other-than-temporary losses on available-for-sale investments were primarily
comprised of an impairment charge of approximately $1.1 million related to an other-than-temporary impairment
of an investment in the Company’s portfolio due to the bankruptcy of Lehman Brothers Holdings.

The Company continues to monitor its overall investment portfolio and if the credit ratings of the issuers of

its investments deteriorate or if the issuers experience financial difficulty, including bankruptcy, the Company
may be required to make additional adjustments to the carrying value of the securities in its investment portfolio
and recognize additional impairment charges for declines in fair value that are determined to be other-than-
temporary.

Trading Investments

As of December 31, 2008, the Company held triple-A rated municipal auction rate securities, with an
aggregate par value of approximately $45.5 million, whose underlying assets are generally student loans that are
substantially backed by the federal government under the Federal Family Education Loan Program through
investment accounts managed by UBS Financial Services, Inc. (“UBS”). The market for municipal auction rate
securities in the Company’s portfolio began experiencing auction failures on February 13, 2008 and there have
been no successful auctions for the securities held in its portfolio since the failures began. In November 2008, the
Company formally accepted the terms of a settlement (the “Settlement”) from UBS. Upon accepting the terms of
the Settlement, the Company received an enforceable, non-transferrable right (the “Put Option”) that would
enable it to sell its auction rate securities back to UBS during the period between June 30, 2010 and July 2, 2012
at par value. Accordingly, the Company recorded the fair value of the Put Option in other assets in the
accompanying consolidated balance sheet and contemporaneously made the fair value election as allowed by
SFAS No. 159, as amended, The Fair Value Option for Financial Assets and Financial Liabilities. Therefore,
beginning in the fourth quarter of 2008, the Company recorded changes in the fair value of the Put Option in
earnings. In conjunction with recording the Put Option, the Company also transferred the auction rate securities
from available-for-sale to trading in the fourth quarter of 2008 and recorded a $1.1 million loss in other expense,
net, in the accompanying statement of income, upon the transfer. Accordingly, the Company recorded changes in
the fair value of the auction rate securities in earnings. During the year ended December 31, 2008, the Company

F-21

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

recorded a gain of $7.4 million related to the Put Option and recorded a loss of $7.5 million related to its
investments in auction rate securities both of which are included in other expense, net, in the accompanying
consolidated statements of income. See Note 5 for additional information regarding the Put Option and auction
rate securities.

5. FAIR VALUE MEASUREMENTS

On January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements, which, among other

things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for
each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. SFAS
No. 157 clarifies that fair value is an exit price, representing the amount that would either be received to sell an
asset or be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is
a market-based measurement that should be determined based on assumptions that market participants would use
in pricing an asset or liability. As a basis for considering such assumptions, SFAS No. 157 establishes a three-tier
fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

•

•

•

Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or
indirectly; and

Level 3. Unobservable inputs in which there is little or no market data, which require the reporting
entity to develop its own assumptions.

The carrying value of cash and cash equivalents, accounts receivable, accounts payable and the majority of

the Company’s accrued expenses approximates their fair value due to the short maturity of these items.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

As of December 31,
2008

Quoted
Prices In
Active Markets
for Identical
Assets (Level 1)

Significant
Other
Observable
Inputs (Level 2)

Significant
Unobservable
Inputs (Level 3)

Short-term investments—available-for-sale . . $
Prepaid expenses and other current assets . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term investments—trading . . . . . . . . . . .
Long-term investments—available-for-sale . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . .

249,175 $
23,308
7,378
37,919
237,666
27,630

(In thousands)
249,175 $
—
—
—

201,162

—

— $

23,308
—
—
36,504
27,630

—
—
7,378
37,919
—
—

The Company measures its cash flow hedges, which are classified as prepaid and other current assets and

accrued expenses, at fair value based on indicative prices in active markets and generally measures its
investments in available-for-sale securities at fair value based on quoted prices in active markets for identical
securities.

The Company measured its AIG Capped Floater (as discussed above), which is included in Level 2 long-
term investments in the table above, using indicative pricing for another AIG security with similar terms which
had regular trading activity.

F-22

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Due to the illiquidity in the municipal auction rate securities market caused by failed auctions, the

Company’s valuation technique for certain of its municipal auction rate securities was to measure such securities
at fair value using a discounted cash flow model. In its discounted cash flow model the Company used several
assumptions to derive a fair value for its investments in municipal auction rate securities including a discount rate
based on the credit quality of the underlying investments and a factor to further discount the investments for the
illiquidity currently present in the market for these securities. Accordingly, the portion of the Company’s long-
term investments, comprised of these securities, changed from Level 1 to Level 3 within SFAS No. 157’s three-
tier fair value hierarchy since valuation at December 31, 2007. Also included in Level 3 is the Put Option. In
order to determine the fair value of the Put Option, the Company measured the differential between the aggregate
par value of its auction rate securities and their fair value as of the reporting date and applied a discount rate that
considers both the time period between the reporting date and the first date the Company is able to exercise its
right to put the auction rate securities to UBS per the terms of the Settlement and the credit worthiness of UBS.

Assets Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)

Balance at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers to Level 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total realized gains (losses) included in earnings . . . . . . . . . . . . . . . . . . . .

Balance at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Put Option

$ —
—
7,378

$7,378

Long-term
Investments

(In thousands)
$ —
45,450
(7,531)

Total

$ —
45,450
(153)

$37,919

$45,297

Realized gains (losses) included in earnings for the period are reported in other (expense) income, net.

6. ACCRUED EXPENSES

Accrued expenses consist of the following:

December 31,

2008

2007

(In thousands)

Accrued compensation and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 58,081
51,624
85,845

$ 62,944
62,003
66,436

$195,550

$191,383

7. EMPLOYEE STOCK-BASED COMPENSATION AND BENEFIT PLANS

Plans

The Company’s stock-based compensation program is a broad based, long-term retention program that is

intended to attract and reward talented employees and align stockholder and employee interests. As of
December 31, 2008, the Company had two stock-based compensation plans under which it was granting stock
options and non-vested stock units. The Company is currently granting stock-based awards from its 2005 Equity
Incentive Plan (as amended, the “2005 Plan”) and its 2005 Employee Stock Purchase Plan (the “2005 ESPP”). In
connection with certain of the Company’s acquisitions, the Company has assumed several plans from the
acquired companies. The Company’s Board of Directors has provided that no new awards will be granted under

F-23

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the Company’s acquired stock plans. The Company’s superseded and expired stock plans include the Amended
and Restated 1995 Stock Plan, Second Amended and Restated 2000 Director and Officer Stock Option and
Incentive Plan, Second Amended and Restated 1995 Non-Employee Director Stock Option Plan and Third
Amended and Restated 1995 Employee Stock Purchase Plan. Awards previously granted under these plans and
still outstanding typically expire ten years from the date of grant and will continue to be subject to all the terms
and conditions of such plans, as applicable.

Under the terms of the 2005 Plan, the Company is authorized to grant incentive stock options (“ISOs”),

non-qualified stock options (“NSOs”), non-vested stock, non-vested stock units, stock appreciation rights
(“SARs”), and performance units and to make stock-based awards to full and part-time employees of the
Company and its subsidiaries or affiliates, where legally eligible to participate, as well as consultants and
non-employee directors of the Company. Currently, the 2005 Plan provides for the issuance of a maximum of
26,500,000 shares of common stock. Under the 2005 Plan, ISOs must be granted at exercise prices no less than
fair market value on the date of grant, except for ISOs granted to employees who own more than 10% of the
Company’s combined voting power, for which the exercise prices must be no less than 110% of the fair market
value at the date of grant. NSOs and SARs must be granted at no less than fair market value on the date of grant,
or in the case of SARs in tandem with options, at the exercise price of the related option. Non-vested stock
awards may be granted for such consideration in cash, other property or services, or a combination thereof, as
determined by the Company’s Compensation Committee of its Board of Directors. All stock-based awards are
exercisable upon vesting. The Company’s policy is to recognize compensation cost for awards with only service
conditions and a graded vesting schedule on a straight line basis over the requisite service period for the entire
award. As of December 31, 2008, there were 40,148,662 shares of common stock reserved for issuance pursuant
to the Company’s stock-based compensation plans and the Company had authorization under its 2005 Plan to
grant 9,899,630 additional stock-based awards.

Under the 2005 ESPP, all full-time and certain part-time employees of the Company are eligible to purchase

common stock of the Company twice per year at the end of a six month payment period (a “Payment Period”).
During each Payment Period, eligible employees who so elect may authorize payroll deductions in an amount no
less than 1% nor greater than 10% of his or her base pay for each payroll period in the Payment Period. At the
end of each Payment Period, the accumulated deductions are used to purchase shares of common stock from the
Company up to a maximum of 12,000 shares for any one employee during a Payment Period. Shares are
purchased at a price equal to 85% of the fair market value of the Company’s common stock on the last business
day of a Payment Period. Employees who, after exercising their rights to purchase shares of common stock in the
2005 ESPP, would own shares representing 5% or more of the voting power of the Company’s common stock,
are ineligible to participate under the 2005 ESPP. The 2005 ESPP provides for the issuance of a maximum of
10,000,000 shares of common stock. As of December 31, 2008, 958,974 shares had been issued under the 2005
ESPP. The Company recorded stock-based compensation costs related to the 2005 ESPP of $2.3 million, $0.8
million and $1.8 million for the years ended December 31, 2008, 2007 and 2006, respectively.

Expense Information under SFAS No. 123R

As required by SFAS No. 123R, the Company estimates forfeitures of employee stock options and

recognizes compensation costs only for those awards expected to vest. Forfeiture rates are determined based on
historical experience. The Company also considers whether there have been any significant changes in facts and
circumstances that would affect its forfeiture rate quarterly. Estimated forfeitures are adjusted to actual forfeiture
experience as needed. The Company recorded stock-based compensation costs, related deferred tax assets and tax
benefits of $124.6 million, $34.9 million and $16.5 million, respectively, in 2008, $65.5 million, $15.6 million
and $26.6 million, respectively, in 2007 and $61.6 million, $9.6 million and $57.1 million, respectively, in 2006.

F-24

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The detail of the total stock-based compensation recognized by income statement classification is as follows

(in thousands):

Income Statement Classifications

2008

2007

2006

Cost of services revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales, marketing and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

1,852
63,737
32,787
26,239

$ 1,479
21,719
24,365
17,928

$ 2,100
18,209
24,095
17,192

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$124,615

$65,491

$61,596

Stock Options

As part of the Company’s Vapps acquisition, the Company assumed 115,061 options to purchase shares of
its common stock, all of which upon assumption were reset to have a five year life and vest over three years at a
rate of 33.3% of the shares underlying the option one year from date of grant and at a rate of 2.78% monthly
thereafter. All other options granted during the year were granted pursuant to the Company’s 2005 Plan. Options
granted pursuant to the 2005 Plan typically have a five year life and vest over three years at a rate of 33.3% of the
shares underlying the option one year from date of grant and at a rate of 2.78% monthly thereafter. A summary of
the status and activity of the Company’s fixed option awards is as follows:

Options

Outstanding at December 31, 2007 . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number of
Options

28,775,258
5,327,850
115,061
(2,871,197)
(1,883,419)

Outstanding at December 31, 2008 . . . . . . . . . . . . . . . . . .

29,463,553

Vested or expected to vest at December 31, 2008 . . . . . . .

28,462,057

Exercisable at December 31, 2008 . . . . . . . . . . . . . . . . . .

19,390,125

Weighted-
Average
Exercise
Price

$29.56
30.87
2.56
15.45
42.75

30.20

30.31

31.52

Weighted-
Average
Remaining
Contractual
Life
(in years)

3.38

Aggregate
Intrinsic Value
(in thousands)

2.79

2.73

2.12

$

$

$

89,877

86,078

51,346

The Company recognized stock-based compensation expense of $93.8 million, $54.6 million and $56.1

million related to options for the years ended December 31, 2008, 2007 and 2006, respectively. As of
December 31, 2008, there was $121.4 million of total unrecognized compensation cost related to stock options.
That cost is expected to be recognized over a weighted-average period of 2.00 years. The total intrinsic value of
stock options exercised during 2008, 2007 and 2006 was $44.8 million, $92.8 million and $180.0 million,
respectively.

F-25

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Option Valuation Information under SFAS No. 123R

The Company estimates the fair value of each stock option on the date of grant using the Black-Scholes
option-pricing model, applying the following assumptions and amortizing that value to expense over the option’s
vesting period using the ratable approach:

Stock options granted during

2008

2007

2006

Expected volatility factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Approximate risk free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected term (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.39 - 0.48
0.30 - 0.37
0.33 - 0.37
1.7% - 2.8% 3.6% - 4.7% 4.5% - 4.9%
3.00 - 3.34
3.37 - 3.38
3.35 - 3.56
0%
0%
0%

For purposes of determining the expected volatility factor, the Company used implied volatility in two-year
market-traded options of the Company’s common stock based on third party volatility quotes in accordance with
the provisions of SAB No. 107. The Company’s decision to use implied volatility is based upon the availability
of actively traded options on the Company’s common stock and its assessment that implied volatility is more
representative of future stock price trends than historical volatility. The approximate risk free interest rate was
based on the implied yield available on U.S. Treasury zero-coupon issues with remaining terms equivalent to the
Company’s expected term on its options. The expected term of the Company’s stock options was based on the
historical employee exercise patterns. The Company also analyzed its historical pattern of option exercises based
on certain demographic characteristics and determined that there were no meaningful differences in option
exercise activity based on the demographic characteristics. The Company does not intend to pay dividends on its
common stock in the foreseeable future. Accordingly, the Company used a dividend yield of zero in its option
pricing model. The weighted average fair value of stock options granted during 2008, 2007 and 2006 was $10.47,
$11.71 and $10.90, respectively.

Non-vested Stock

Shares of non-vested stock assumed in conjunction with the Company’s acquisition of XenSource, Inc.,
which upon assumption were reset to vest over three years at a rate of 33.3% of the shares one year from date of
grant and at a rate of 2.78% monthly thereafter based on service. The following table summarizes the Company’s
non-vested stock activity for the year ended December 31, 2008:

Number of
Shares

Weighted-
Average
Fair Value
at Grant Date

Non-vested at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,284,139
(499,359)

Non-vested at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

784,780

$39.65
39.65

39.65

For the years ended December 31, 2008, 2007 and 2006, the Company recognized stock-based

compensation expense of $17.2 million, $3.9 million and $1.4 million, respectively, related to non-vested stock.
The fair value of non-vested stock released in 2008, 2007 and 2006 was $11.0 million, $1.3 million and $1.3
million, respectively. As of December 31, 2008, there was $24.1 million of total unrecognized compensation cost
related to non-vested stock. That cost is expected to be recognized over a weighted-average period of 1.80 years.

F-26

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Non-vested Stock Units

The Company awarded certain senior members of management non-vested stock units from the 2005 Plan.

The number of non-vested stock units underlying each award was determined based on achievement of a specific
corporate operating income goal. If the performance goal was less than 90% attained, then no non-vested stock
units were issued pursuant to the authorized award. For performance at and above 90%, the number of
non-vested stock units issued were based on a graduated slope, with the maximum number of non-vested stock
units issuable pursuant to the award capped at 125% of the base number of non-vested stock units set forth in the
executive’s award agreement. If the performance goal is met, the non-vested stock units vest 33.33% on each
anniversary subsequent to the date of the award. Each non-vested stock unit, upon vesting, will represent the
right to receive one share of the Company’s common stock. If the performance goals were not met, no
compensation cost was recognized and any previously recognized compensation cost was reversed. During 2008
and 2007, the goal was achieved within the range of the graduated slope, and there was no material adjustment to
compensation costs related to non-vested stock units granted to executives. In addition, the Company also awards
non-vested stock units to certain senior members of management that vest based on service. These units vest
annually over a three year vest period in equal installments and, upon vesting, each stock unit will represent the
right to receive one share of the Company’s common stock.

In addition, during 2007, the Company awarded 25,000 non-vested stock units to a certain senior member of
management with performance goals related to building the executive management team. The performance goals
were met during 2007 and the award vests based on service at a rate of 33.33% on each anniversary date. The
Company also awards non-vested stock units to its non-employee directors annually. These units vest monthly in
equal installments based on service and, upon vesting, each stock unit represents the right to receive one share of
the Company’s common stock.

The Company assumed 159,342 non-vested stock units in conjunction with its 2007 Acquisitions, the

majority of which upon assumption were reset to vest over three years based on service at a rate of 33.3% on
each anniversary date. In addition, as part of its 2007 Acquisitions, the Company also granted 26,183 non-vested
stock units from its 2005 Plan, of which the majority vest based on service at a rate of 50% on the first
anniversary of the grant date and 50% on the second anniversary of the grant date. As part of the 2006
Acquisitions, the Company assumed 175,717 non-vested stock units, of which the majority vest based on service
at a rate of 50% on the first anniversary of the grant date and 50% on the second anniversary of the grant date.

The following table summarizes the Company’s non-vested stock unit activity for the year ended

December 31, 2008:

Non-vested at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number of
Shares

684,392
501,645
(260,940)
(139,616)

Non-vested at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

785,481

Weighted-
Average
Fair Value
at Grant Date

$37.00
32.49
28.95
34.17

34.67

For the years ended December 31, 2008, 2007 and 2006, the Company recognized stock-based

compensation expense of $13.6 million, $7.0 million and $4.1 million, respectively, related to non-vested stock
units. The fair value of the non-vested stock units released in 2008, 2007, 2006 was $7.5 million, $5.3 million

F-27

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

and $2.3 million, respectively. As of December 31, 2008, there was $16.1 million of total unrecognized
compensation cost related to non-vested stock units. That cost is expected to be recognized over a weighted-
average period of 1.82 years.

Benefit Plan

The Company maintains a 401(k) benefit plan allowing eligible U.S.-based employees to contribute up to

60% of their annual compensation, limited to an annual maximum amount as set periodically by the Internal
Revenue Service. The Company, at its discretion, may contribute up to $0.50 for each dollar of employee
contribution. The Company’s total matching contribution to an employee is typically made at 3% of the
employee’s annual compensation. The Company’s matching contributions were $7.3 million, $5.9 million and
$3.7 million in 2008, 2007 and 2006, respectively. The Company’s contributions vest over a four-year period at
25% per year.

8. CAPITAL STOCK

Stock Repurchase Programs

The Company’s Board of Directors authorized an ongoing stock repurchase program with a total repurchase

authority granted to the Company of $1.8 billion. The Company may use the approved dollar authority to
repurchase stock at any time until the approved amounts are exhausted. The objective of the Company’s stock
repurchase program is to improve stockholders’ returns. At December 31, 2008, approximately $77.0 million was
available to repurchase common stock pursuant to the stock repurchase program. All shares repurchased are
recorded as treasury stock. A portion of the funds used to repurchase stock over the course of the program was
provided by proceeds from employee stock option exercises and the related tax benefit.

The Company is authorized to make open market purchases of its common stock using general corporate
funds. Additionally, the Company entered into structured stock repurchase arrangements with large financial
institutions using general corporate funds in order to lower the average cost to acquire shares. These programs
include terms that require the Company to make up-front payments to the counterparty financial institution and
result in the receipt of stock during or at the end of the term of the agreement or the receipt of either stock or cash
at the maturity of the agreement, depending on market conditions.

During the year ended December 31, 2008, the Company took delivery of 4,406,757 shares at an average

price of $33.30 per share from its structured repurchase agreements and it expended approximately $197.6
million on open market purchases, repurchasing 6,451,591 shares of outstanding common stock at an average
price of $30.63. In addition, during the year the Company made up-front payments of $58.9 million to certain
financial institutions related to structured stock repurchase agreements. As of December 31, 2008, the Company
had no prepaid notional amounts remaining under its structured stock repurchase programs.

During the year ended December 31, 2007, the Company took delivery of 1,655,089 shares at an average

price of $35.34 per share from its structured repurchase agreements and it expended approximately $150.0
million on open market purchases repurchasing 3,720,800 shares of outstanding common stock at an average
price of $40.31. In addition, during the year the Company made up-front payments of $110.0 million to certain
financial institutions related to structured stock repurchase agreements.

During the year ended December 31, 2006, the Company took delivery of 4,307,112 shares at an average

price of $30.76 per share from its structured repurchase agreements and it expended approximately $159.8
million on open market purchases repurchasing 5,193,410 shares of outstanding common stock at an average

F-28

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

price of $30.77. In addition, during the year the Company made up-front payments of $114.4 million to certain
financial institutions related to structured stock repurchase agreements.

Preferred Stock

The Company is authorized to issue 5,000,000 shares of preferred stock, $0.01 par value per share. No

shares of such preferred stock were issued and outstanding at December 31, 2008 or 2007.

9. LONG-TERM DEBT

Credit Facility

Effective on August 9, 2005, the Company entered into a revolving credit facility (the “Credit Facility”)

with a group of financial institutions (the “Lenders”). Effective September 27, 2006, the Company entered into
an amendment and restatement of its Credit Facility (the “Amendment”). The Amendment decreased the overall
range of interest rates the Company must pay on amounts outstanding on the Credit Facility and lowered the
facility fee. In addition, the Amendment extended the term of the Credit Facility. The Credit Facility, as
amended, allows the Company to increase the revolving credit commitment up to a maximum aggregate
revolving credit commitment of $175.0 million. The Credit Facility, as amended, currently provides for a
revolving line of credit that will expire on September 27, 2011 in the aggregate amount of $100.0 million, subject
to continued covenant compliance. A portion of the revolving line of credit (i) in the aggregate amount of $25.0
million may be available for issuances of letters of credit and (ii) in the aggregate amount of $15.0 million may
be available for swing line loans. The Credit Facility, as amended, currently bears interest at LIBOR plus 0.32%
and adjusts in the range of 0.32% to 0.80% above LIBOR based on the level of the Company’s total debt and its
adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) as defined in the agreement.
In addition, the Company is required to pay a quarterly facility fee ranging from 0.08% to 0.20% based on the
aggregate amount available under the Credit Facility, as amended, and the level of the Company’s total debt and
its adjusted EBITDA. Borrowings under the Credit Facility, as amended, are guaranteed by the Company and
certain of the Company’s U.S. and foreign subsidiaries, which guarantees are secured by a pledge of shares of
certain foreign subsidiaries. As of December 31, 2008, there were no amounts outstanding under the Credit
Facility, as amended.

The Credit Facility, as amended, contains customary default provisions, and the Company must comply with

various financial and non-financial covenants. The financial covenants consist of a minimum interest coverage
ratio and a maximum consolidated leverage ratio. The primary non-financial covenants contain certain limits on
the Company’s ability to pay dividends, conduct certain mergers or acquisitions, make certain investments and
loans, incur future indebtedness or liens, alter the Company’s capital structure or sell stock or assets. As of
December 31, 2008, the Company was in compliance with all covenants of the Credit Facility.

Term Loan

Effective on August 9, 2005, a subsidiary of the Company entered into a term loan facility (the “Term

Loan”) with the Lenders. The Term Loan provided for an 18-month single-draw term loan facility in the
aggregate amount of $100.0 million. The Term Loan bore interest at a rate of LIBOR plus 0.5% and adjusted in
the range of 0.5% to 1.25% above LIBOR based on the level of the subsidiary’s total debt and its adjusted
EBITDA, as defined in the agreement. Borrowings under the Term Loan were guaranteed by the Company and
certain of its U.S.-domiciled and foreign-domiciled subsidiaries, which guarantees were secured by a pledge of
shares of certain foreign subsidiaries. In addition, the Company was required to pay a quarterly facility fee
ranging from 0.125% to 0.25% based on the aggregate amount of the Term Loan and the level of the Company’s
total debt and its adjusted EBITDA. The Term Loan was paid in full in February 2006.

F-29

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. COMMITMENTS AND CONTINGENCIES

Leases

The Company leases certain office space and equipment under various operating leases. In addition to rent,
the leases require the Company to pay for taxes, insurance, maintenance and other operating expenses. Certain of
these leases contain stated escalation clauses while others contain renewal options. The Company recognizes rent
expense on a straight-line basis over the term of the lease, excluding renewal periods, unless renewal of the lease
is reasonably assured.

Rental expense for the years ended December 31, 2008, 2007 and 2006 totaled approximately $43.5 million,
$33.5 million and $24.9 million, respectively. Sublease income for the years ended December 31, 2008, 2007 and
2006 was approximately $0.8 million, $0.8 million and $0.7 million, respectively. Lease commitments under
non-cancelable operating leases with initial or remaining terms in excess of one year and sublease income
associated with non-cancelable subleases, are as follows:

Operating
Leases

Sublease
Income

(In thousands)

Years ending December 31,

2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 45,668
40,139
34,456
29,831
21,008
52,700

$ 774
566
275
275
253
—

$223,802

$2,143

In 2008, the Company entered into a lease to acquire additional office space in Santa Clara, CA. The rental

commencement date will not begin until 2011 and the pricing for the lease will not be finalized until a future
date. Accordingly, the future payment obligations related to this lease are not included in the table above.

Off-Balance Sheet Arrangement

During 2002, the Company became a party to a synthetic lease arrangement totaling approximately $61.0

million for its corporate headquarters office space in Fort Lauderdale, Florida. The synthetic lease represented a
form of off-balance sheet financing under which an unrelated third-party lessor funded 100% of the costs of
acquiring the property and leased the asset to the Company. The synthetic lease qualified as an operating lease
for accounting purposes and as a financing lease for tax purposes. The Company did not include the property or
the related lease debt as an asset or a liability in its consolidated balance sheets. Consequently, payments made
pursuant to the lease were recorded as operating expenses in the Company’s consolidated statements of income.
The Company entered into the synthetic lease in order to lease its headquarters properties under more favorable
terms than under its previous lease arrangements.

The initial term of the synthetic lease was seven years, expiring in April 2009. The lease payments varied

based on LIBOR plus a margin. At any time during the lease term and upon a 30-days’ written notice, the
Company had the option to purchase the property for an amount representing the original property cost and
transaction fees of approximately $61.0 million plus any lease breakage costs and outstanding amounts owed.
Effective October 23, 2008, the Company exercised its option and purchased the property for approximately
$61.1 million, including closing costs and legal fees. There were no lease breakage costs incurred.

F-30

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The synthetic lease included certain financial covenants including a requirement for the Company to
maintain a pledged balance of approximately $62.8 million in cash and/or investment securities as collateral.
This amount was included in restricted cash equivalents and investments in the accompanying consolidated
balance sheet as of December 31, 2007. The synthetic lease also included non-financial covenants, including the
maintenance of the property and adequate insurance, prompt delivery of financial statements to the
administrative agent of the lessor and prompt payment of taxes associated with the property. Following the
termination of the synthetic lease, the Company ceased to be bound by these covenants.

Office Leases

The Company has an operating lease obligation related to a property that is not fully utilized that continues

to 2018 with a total remaining obligation at December 31, 2008 of approximately $5.0 million, of which $0.9
million was accrued as of December 31, 2008, and is reflected in accrued expenses and other liabilities in the
accompanying consolidated balance sheets. In calculating this accrual, the Company made estimates, based on
market information, including the estimated vacancy periods and sublease rates and opportunities. The Company
periodically re-evaluates its estimates and if actual circumstances prove to be materially worse than management
has estimated, the total charges for these vacant facilities could be significantly higher.

Legal Matters

In the fourth quarter of 2008, the three previously disclosed purported shareholder derivative actions against

certain of the Company’s current and former directors and officers, and against the Company as a nominal
defendant, alleging that certain stock option grants made by it were dated and accounted for inappropriately,
were settled and dismissed. No defendant was required to make any monetary contribution to the settlement nor
concede any wrongdoing as part of the settlement. The settlement provided for an award of attorneys’ fees to
plaintiffs’ counsel, most of which was paid by the Company’s directors’ and officers’ liability insurer and the
remainder of which was paid by the Company.

Due to the nature of the Company’s business, it is subject to patent infringement claims, including current

suits against it or one or more of its wholly-owned subsidiaries by Realtime Data, LLC, SSL Services, LLC,
Accolade Systems LLC, and 01 Communiqué Laboratory Inc. alleging infringement by various Citrix products
and services. These complaints were filed separately in the United States District Court for the Eastern District of
Texas in April 2008 and in January 2007, and in the United States District Court for the Northern District of Ohio
in February 2006, respectively, and seek unspecified damages and other relief. The Company believes that it has
meritorious defenses to the allegations made in these complaints and intends to vigorously defend these lawsuits;
however, it is unable currently to determine the ultimate outcome of these or similar matters or the potential
exposure to loss, if any.

In addition, the Company is a defendant in various litigation matters generally arising out of the normal
course of business. Although it is difficult to predict the ultimate outcome of these cases, the Company believes
that the ultimate outcome will not materially affect its business, financial position, results of operations or cash
flows.

Guarantees

FIN No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect

Guarantees of Indebtedness of Others, requires certain guarantees to be recorded at fair value and requires a
guarantor to make disclosures, even when the likelihood of making any payments under the guarantee is remote.

F-31

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For those guarantees and indemnifications that do not fall within the initial recognition and measurement
requirements of FIN No. 45, the Company must continue to monitor the conditions that are subject to the
guarantees and indemnifications, as required under existing generally accepted accounting principles, to identify
if a loss has been incurred. If the Company determines that it is probable that a loss has been incurred, any such
estimable loss would be recognized. The initial recognition and measurement requirements do not apply to the
provisions contained in the majority of the Company’s software license agreements that indemnify licensees of
the Company’s software from damages and costs resulting from claims alleging that the Company’s software
infringes the intellectual property rights of a third party. The Company has not made payments pursuant to these
provisions. The Company has not identified any losses that are probable under these provisions and, accordingly,
the Company has not recorded a liability related to these indemnification provisions.

Purchase Obligations

The Company has agreements with suppliers to purchase inventory and estimates its non-cancelable
obligations under these agreements for the fiscal year ended December 31, 2009 to be approximately $6.3
million.

Liabilities Related to Payroll Taxes

In the fourth quarter of 2008, the Company recorded a reduction to operating expenses of approximately
$6.4 million related to an adjustment of payroll taxes initially recorded in conjunction with the Company’s Audit
Committee’s voluntary, independent investigation of the Company’s historical stock option granting practices
which was concluded in 2007. These payroll tax liabilities were reduced upon agreement with the Internal
Revenue Service.

11. INCOME TAXES

The United States and foreign components of income before income taxes are as follows:

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (13,997)
210,920

(In thousands)
$ 46,475
204,433

$ 65,363
177,718

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$196,923

$250,908

$243,081

2008

2007

2006

The components of the provision for income taxes are as follows:

2008

2007

2006

(In thousands)

Current:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

6,315
19,175
—

$

7,692
28,512
855

$ 46,073
14,176
4,186

Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25,490
(6,843)

37,059
(634)

64,435
(4,351)

Total provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 18,647

$ 36,425

$ 60,084

F-32

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The significant components of the Company’s deferred tax assets and liabilities consisted of the following:

December 31,

2008

2007

(In thousands)

Deferred tax assets:

Accruals and reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock option compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 15,847
696
8,511
5,272
54,381
14,819
43,246
(14,217)

$ 19,323
6,030
5,583
7,998
64,208
5,918
23,316
(8,364)

Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

128,555

124,012

Deferred tax liabilities:

Acquired technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(67,332)
(10,495)

(79,555)
(7,261)

Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(77,827)

(86,816)

Total net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 50,728

$ 37,196

SFAS No. 109, Accounting for Income Taxes, requires a valuation allowance to reduce the deferred tax
assets reported if it is not more likely than not that some portion or all of the deferred tax assets will be realized.
At December 31, 2008, the Company determined that a $14.2 million valuation allowance relating to deferred tax
assets for net operating losses from acquired companies and unrealized losses from temporary impairments on
available-for-sale investments was necessary.

The Company does not expect to remit earnings from its foreign subsidiaries. Undistributed earnings of the

Company’s foreign subsidiaries amounted to approximately $644.3 million at December 31, 2008. Those
earnings are considered to be permanently reinvested and, accordingly, no U.S. federal and state income taxes
have been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, the
Company could be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and
withholding taxes payable to various foreign countries.

At December 31, 2008, the Company had $138.4 million of remaining net operating loss carryforwards
from acquisitions. The utilization of these net operating loss carryforwards are limited in any one year pursuant
to Internal Revenue Code Section 382 and begin to expire in 2018.

At December 31, 2008, the Company had research and development tax credit carryforwards of

approximately $5.3 million that begin to expire in 2012.

F-33

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of the Company’s effective tax rate to the statutory federal rate is as follows:

Year Ended
December 31,

2008

2007

2006

Federal statutory taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State income taxes, net of federal tax benefit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Permanent differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock option compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in accruals for uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

35.0% 35.0% 35.0%
3.8
4.1
4.3
(20.9)
(21.4)
(30.1)
5.4
3.0
(0.2)
(2.0)
(3.2)
(5.3)
1.4
4.9
3.4
(3.8) —
1.0
(0.1) —
(0.1)
(0.5) —

9.5% 14.5% 24.7%

The Company and one or more of its subsidiaries is subject to U.S. federal income taxes, as well as income
taxes of multiple state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S.
federal, state and local, or non- U.S. income tax examinations by tax authorities for years prior to 2004. The
Internal Revenue Service commenced an examination of the Company’s U.S. federal income tax returns for 2004
and 2005 in the third quarter of 2006.

The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income

Taxes, on January 1, 2007. As a result of the implementation of Interpretation 48, the Company recognized an
approximate $12.4 million increase in the liability for unrecognized tax benefits, which was accounted for as a
reduction to the January 1, 2007 balance of retained earnings. A reconciliation of the beginning and ending
amount of unrecognized tax benefits for the year ended December 31, 2008 is as follows (in thousands):

Balance at January 1, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions based on tax positions related to the current year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions (reductions) for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions related to the expiration of statutes of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 36,895
1,355
—
(10,967)
—

Balance at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions based on tax positions related to the current year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions related to the expiration of statutes of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

27,283
2,069
826
(1,849)
—

Balance at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 28,329

The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months.

At December 31, 2008, there were no amounts related to tax positions for which the ultimate deductibility is

highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of
deferred tax accounting, other that interest and penalties, the disallowance of the shorter deductibility period
would not affect the annual effective tax rate but would accelerate the payment or receipt of cash to an earlier
period.

F-34

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax
expense. During the year ended December 31, 2008, the Company recognized $0.1 million of expense related to
interest and penalties. The Company has approximately $0.2 million for the payment of interest and penalties
accrued at December 31, 2008.

12. SEGMENT INFORMATION AND SIGNIFICANT CUSTOMERS

The Company operates in a single industry segment consisting of the design, development and marketing of

technology solutions that allow applications to be delivered, supported and shared on-demand. The Company’s
revenues are derived from sales of its Citrix Delivery Center products and related technical services in the
Americas, EMEA and Asia-Pacific regions and from its online services sold by its Online Services division.
These three geographic regions and the Online Services division constitute the Company’s four reportable
segments.

The Company does not engage in intercompany revenue transfers between segments. The Company’s chief

operating decision maker (“CODM”) evaluates the Company’s performance based primarily on profitability in
the geographic locations in which the Company operates and separately evaluates the performance of its Online
Services division. Segment profit for each segment includes certain sales, marketing, general and administrative
expenses directly attributable to the segment, including research and development costs in the Online Services
division and excludes certain expenses that are managed outside the reportable segments. Costs excluded from
segment profit primarily consist of certain research and development costs associated with the Company’s
application delivery infrastructure products, stock-based compensation costs, amortization of product related
technology, amortization of other intangible assets, interest, corporate expenses and income taxes, as well as
charges for in-process research and development. Corporate expenses are comprised primarily of corporate
marketing costs, stock-based compensation costs, operations and certain general and administrative expenses,
which are separately managed. Accounting policies of the Company’s segments are the same as its consolidated
accounting policies.

International revenues (sales outside of the United States) accounted for approximately 45.8%, 44.5% and
47.4% of the Company’s net revenues for the year ended December 31, 2008, 2007, and 2006, respectively. Net
revenues and segment profit for 2008, 2007 and 2006 classified by the Company’s reportable segments, are
presented below.

Net revenues:

Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia-Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Online Services division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 670,523
524,465
128,301
260,065

$ 614,181
447,201
116,816
213,744

$ 499,278
391,650
94,596
148,795

Consolidated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,583,354

$1,391,942

$1,134,319

2008

2007

2006

(In thousands)

F-35

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2008

2007

2006

(In thousands)

Segment profit (loss):

Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia-Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Online Services division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 340,582
337,709
23,366
76,628

$ 295,213
289,590
30,543
65,032

$ 252,996
253,956
31,887
36,084

Unallocated expenses(1):

Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
In-process research and development
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net interest and other income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other corporate expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(70,752)
(1,140)
(262,655)
26,922
(273,737)

(46,983)
(9,800)
(183,816)
48,501
(237,372)

(36,136)
(1,000)
(140,570)
39,737
(193,873)

Consolidated income before income taxes . . . . . . . . . . . . . . .

$ 196,923

$ 250,908

$ 243,081

(1) Represents expenses presented to management only on a consolidated basis and not allocated to the

geographic operating segments.

Identifiable assets classified by the Company’s reportable segments are shown below. Long-lived assets

consist of property and equipment, net, and are shown below.

December 31,

2008

2007

(In thousands)

Identifiable assets:

Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia-Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Online Services division . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,669,469
654,829
87,026
282,982

$1,811,922
411,465
83,395
227,911

Total identifiable assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,694,306

$2,534,693

Long-lived assets, net:

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 201,713
31,473
21,148

$

97,238
28,782
8,887

Total long-lived assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 254,334

$ 134,907

Export revenue represents shipments of finished goods and services from the United States to international
customers, primarily in Latin America and Canada. Shipments from the United States to international customers
for 2008, 2007 and 2006 were $69.5 million, $55.9 million and $50.9 million, respectively.

In fiscal years 2008, 2007 and 2006, one distributor, Ingram Micro, accounted for 12%, 10% and 10%,
respectively, of the Company’s total net revenues. The Company’s distributor arrangements with Ingram Micro
consist of several non-exclusive, independently negotiated agreements with its subsidiaries, each of which cover
different countries or regions. Each of these agreements is separately negotiated and is independent of any other
contract (such as a master distribution agreement). None of these contracts were individually responsible for over
10 percent of the Company’s total net revenues in each of the last three fiscal years. In fiscal years 2008, 2007
and 2006, there were no resellers that accounted for over 10% of the Company’s total net revenues.

F-36

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In addition to evaluating the Company’s profitability by geography, including the Company’s Online
Services division, its CODM also evaluates revenues by product groupings. Accordingly, the following table
presents revenues for Product licenses, License updates and product related Technical services by product
grouping for the Company’s Application Virtualization products, Application Networking products and other
products and Online services revenues for the Online Services division’s products, for the years ended:

December 31,

2008

2007

2006

(In thousands)

Net revenues:

Application Virtualization revenues . . . . . . . . . . . . . . . . . . . . . . . . .
Online Services division revenues . . . . . . . . . . . . . . . . . . . . . . . . . .
Application Networking revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,081,624
260,065
193,031
48,634

$ 998,188
213,744
155,385
24,625

$ 871,656
148,795
109,209
4,659

Total net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,583,354

$1,391,942

$1,134,319

13. DERIVATIVE FINANCIAL INSTRUMENTS

As of December 31, 2008 and December 31, 2007, the Company had $23.3 million and $11.7 million of

derivative assets, respectively, and $27.6 million and $5.9 million of derivative liabilities, respectively,
representing the fair values of the Company’s outstanding derivative instruments, which are recorded in prepaid
expenses and other current assets, other assets, accrued expenses and other liabilities in the accompanying
consolidated balance sheets. As of December 31, 2008, the Company’s derivative assets and liabilities primarily
resulted from cash flow hedges related to its forecasted operating expenses transacted in local currencies. The
change in the derivative component in accumulated other comprehensive (loss) income includes unrealized gains
or losses that arose from changes in market value of derivatives that were held during the period, and gains or
losses that were previously unrealized, but have been recognized in current period net income due to termination
or maturities of derivative contracts. This reclassification has no effect on total comprehensive income or
stockholders’ equity. The following table presents these components of accumulated other comprehensive (loss)
income, net of tax, for the Company’s derivative instruments (in thousands):

For the Year Ended December 31,

2008

2007

2006

Unrealized gains on derivative instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification of realized (losses) gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

399
(8,815)

$ 9,144
(7,623)

$6,395
2,011

Net change in other comprehensive (loss) income due to derivative

instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(8,416) $ 1,521

$8,406

The total cumulative unrealized (loss) gain on derivative instruments was $(3.0) million and $5.5 million at
December 31, 2008 and 2007, respectively, and is included in accumulated other comprehensive (loss) income in
the accompanying consolidated balance sheets. A substantial amount of the net unrealized gain as of
December 31, 2008 is expected to be recognized in income over the next twelve months at the same time the
hedged items are recognized in income.

Cash Flow Hedges. At December 31, 2008 and 2007, the Company had in place foreign currency forward
sale contracts with a notional amount of $124.2 million and $104.3 million, respectively, and foreign currency
forward purchase contracts with a notional amount of $339.6 million and $311.1 million, respectively. The fair

F-37

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

value of these contracts at December 31, 2008 and 2007 were assets of $23.3 million and $11.7 million,
respectively and liabilities of $27.6 million and $5.9 million, respectively. A substantial portion of the
Company’s overseas expenses are and will continue to be transacted in local currencies. To protect against
fluctuations in operating expenses and the volatility of future cash flows caused by changes in currency exchange
rates, the Company has established a program that uses foreign exchange forward contracts to hedge its exposure
to these potential changes. The terms of these instruments, and the hedged transactions to which they relate,
generally do not exceed 12 months. Currencies hedged are Euros, British pounds sterling, Australian dollars,
Japanese yen, Indian rupees, Swiss francs, Singapore dollars, Hong Kong dollars, Canadian dollars, Danish krone
and Swedish krona. There was no material ineffectiveness of the Company’s foreign currency hedging program
for 2008, 2007 or 2006.

Fair Value Hedges. From time to time, the Company uses interest rate swap instruments to hedge against

the changes in fair value of certain of its available-for-sale securities due to changes in interest rates. Changes in
the fair value of the swap instruments are recorded in earnings along with related designated changes in the value
of the underlying investments. There were no material fair value hedges outstanding as of December 31, 2008,
2007 or 2006.

Derivatives not Designated as Hedges. The Company utilizes certain derivative instruments that either do
not qualify or are not designated for hedge accounting treatment under SFAS No. 133. Accordingly, changes in
the fair value of these contracts are recorded in other expense, net.

14. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share:

Year Ended December 31,

2008

2007

2006

(In thousands, except per
share information)

Numerator:

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$178,276

$214,483

$182,997

Denominator:

Denominator for basic earnings per share—weighted average shares . . . .
Effect of dilutive securities:

183,023

181,501

180,992

Employee stock awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,659

5,879

6,733

Denominator for diluted earnings per share—adjusted weighted-average
shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Basic earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

186,682

187,380

187,725

$

$

0.97

0.96

$

$

1.18

1.14

$

$

1.01

0.97

Antidilutive weighted average shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23,979

17,096

17,892

F-38

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15. RECENT ACCOUNTING PRONOUNCEMENTS

In December 2007, the FASB issued SFAS No. 141R, Business Combinations, SFAS No. 141R will require,

among other things, the expensing of direct transaction costs, including deal costs and restructuring costs as
incurred, acquired IPR&D assets to be capitalized, certain contingent assets and liabilities to be recognized at fair
value, and arrangements related to contingent merger consideration, may be required to be measured at fair value
until settled, with changes in fair value recognized each period into earnings. The adoption of SFAS No. 141R is
effective for the Company on a prospective basis for transactions occurring in 2009 and earlier adoption is not
permitted. Historically, the Company has been acquisitive and if it continues to be so, SFAS No. 141R will have
a material impact on the Company’s consolidated financial position, results of operations and cash flows if it
enters into material business combinations after the standard’s effective date.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements. SFAS No. 160 will change the accounting for and reporting of minority interests. Under the new
standard, minority interests, will be referred to as noncontrolling interests and will be reported as equity in the
parent company’s consolidated financial statements. Transactions between the parent company and the
noncontrolling interests will be treated as transactions between shareholders provided that the transactions do not
create a change in control. Gains and losses will be recognized in earnings for transactions between the parent
company and the noncontrolling interests, unless control is achieved or lost. SFAS No. 160 requires retrospective
adoption of the presentation and disclosure requirements for existing minority interests. All other requirements of
SFAS No. 160 shall be applied prospectively. SFAS No. 160 is effective for the Company beginning in the first
quarter of fiscal year 2009 and earlier adoption is not permitted. SFAS No. 160 may have a material impact on
the Company’s consolidated financial position, results of operations and cash flows if it enters into material
transactions or acquires a noncontrolling interest after the standard’s effective date.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities. SFAS No. 161 is intended to improve financial reporting about derivative instruments and hedging
activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s
financial position, financial performance, and cash flows. The provisions of SFAS No. 161 are effective for the
quarter ending March 31, 2009.

16. SUBSEQUENT EVENT

On January 28, 2009, the Company announced the implementation of a strategic restructuring program,

which includes steps to reduce its headcount by approximately 500 full-time positions, representing
approximately ten percent of its global workforce.

F-39

CITRIX SYSTEMS, INC.

SUPPLEMENTAL FINANCIAL INFORMATION
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

2008
Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic earnings per common share . . . . . . . . . . . . . . .
Diluted earnings per common share . . . . . . . . . . . . . .

2007
Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from operations . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic earnings per common share . . . . . . . . . . . . . . .
Diluted earnings per common share . . . . . . . . . . . . . .

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Total Year

(In thousands, except per share amounts)

$377,034
336,603
30,291
34,378
0.19
0.18

$391,730
345,873
28,890
34,649
0.19
0.18

$398,893 $415,697 $1,583,354
1,408,222
369,141
356,605
170,001
63,121
47,699
178,276
60,100
49,149
0.97
0.33
0.27
0.96
0.33
0.26

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Total Year

(In thousands, except per share amounts)

$308,088
278,674
38,231
37,633
0.21
0.20

$334,364
302,500
54,734
53,390
0.30
0.29

$349,931 $399,559 $1,391,942
1,254,335
359,236
313,925
202,407
49,458
59,984
214,483
62,765
60,695
1.18
0.34
0.34
1.14
0.33
0.33

The sum of the quarterly earnings per share amounts do not add to the annual earnings per share amount due to
the weighting of common and common equivalent shares outstanding during each of the respective periods.

F-40

CITRIX SYSTEMS, INC.

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

Beginning
of Period

Charged
to Costs and
Expenses

Charged
to Other
Accounts

Deductions

Balance
at End
of Period

(In thousands)

2008
Deducted from asset accounts:

Allowance for doubtful accounts . . . . . . . . . . . . .
Allowance for returns . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance for deferred tax assets . . . .

$2,891
1,670
8,364

$1,613
—
—

$3,366(3)
2,103(1)
5,853(5)

$ 809(2)
2,132(4)
—

$7,061
1,641
14,217

2007
Deducted from asset accounts:

Allowance for doubtful accounts . . . . . . . . . . . . .
Allowance for returns . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance for deferred tax assets . . . .

$2,370
1,667
1,332

$2,578
—
—

23(3)
$
3,806(1)(3)
8,364(5)

$2,080(2)
3,803(4)
1,332

$2,891
1,670
8,364

2006
Deducted from asset accounts:

Allowance for doubtful accounts . . . . . . . . . . . . .
Allowance for returns . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance for deferred tax assets . . . .

$2,050
2,332
1,332

$1,978
—
—

$
79(3)
4,608(1)(3)

—

$1,737(2)
5,273(4)
—

$2,370
1,667
1,332

(1) Netted against revenues.
(2) Uncollectible accounts written off, net of recoveries.
(3) Additions from acquisitions.
(4) Credits issued for stock-balancing rights.
(5) Related to deferred tax assets on unrealized losses and acquisitions.

F-41

Exhibit No.

Description

EXHIBIT INDEX

2.1

(13)

2.2

(14)

2.3

(27)

2.4

(30)

2.5

(31)

Agreement and Plan of Merger dated as of June 1, 2005 by and among Citrix Systems, Inc.,
NCAR Acquisition Corporation, NCAR LLC, NetScaler, Inc. and Guarev Garg as stockholder
representative

Amendment No. 1 to Agreement and Plan of Merger dated as of June 1, 2005 by and among
Citrix Systems, Inc., NCAR Acquisition Corporation, NCAR LLC, NetScaler, Inc. and Guarev
Garg as stockholder representative, dated as of June 24, 2005

Agreement and Plan of Merger, dated as of August 4, 2006, by and among Citrix Systems,
Inc., Banyan Acquisition Corporation, Orbital Data Corporation and John Jaggers as the
stockholder

Agreement and Plan of Merger and Reorganization, dated as of August 14, 2007, by and
among Citrix Systems, Inc., PVA Acquisition Corporation, PVA Acquisition LLC,
XenSource, Inc. and John G. Connors as stockholder representative

Amendment No. 1 to Agreement and Plan of Merger and Reorganization dated as of
August 14, 2007 by and among Citrix Systems, Inc. PVA Acquisition Corporation, PVA
Acquisition LLC, XenSource, Inc. and John G. Connors as stockholder representative, dated
September 20, 2007

3.1

3.2

3.3

4.1

10.1*

10.2*

10.4*

10.5*

10.6*

10.7*

10.8*

(1)

Amended and Restated Certificate of Incorporation of the Company

(35)

(34)

Certificate of Amendment of Amended and Restated Certificate of Incorporation

Amended and Restated By-laws of the Company

(2)

Specimen certificate representing the Common Stock

Fourth Amended and Restated 1995 Stock Plan

(36)

Second Amended and Restated 1995 Non-Employee Director Stock Option Plan

(3)

(4)

(5)

(6)

Second Amended and Restated 2000 Director and Officer Stock Option and Incentive Plan

2000 Director and Officer Stock Option and Incentive Plan, Non-Qualified Stock Option
Agreement

2000 Director and Officer Stock Option and Incentive Plan, Incentive Stock Option
Agreement

Amended and Restated 2000 Stock Incentive Plan of Net6 Inc. (a subsidiary of Citrix Systems,
Inc.)

Amended and Restated 2003 Stock Incentive Plan of Net6 Inc. (a subsidiary of Citrix Systems,
Inc.)

10.9

(7) Microsoft Master Source Code Agreement by and between the Company and Microsoft dated

December 16, 2004

10.10

(8)

10.11

(38)

License Form by and between the Company and Microsoft Corporation dated December 16,
2004 (with certain information omitted pursuant to a request for confidential treatment and
filed separately with the Securities and Exchange Commission)

Participation Agreement dated as of April 23, 2002, by and among Citrix Systems, Inc., Citrix
Capital Corp., Selco Service Corporation and Key Corporate Capital, Inc. (the “Participation
Agreement”) (with certain information omitted pursuant to a grant of confidential treatment
and filed separately with the Securities and Exchange Commission)

10.12

(39)

Amendment No. 1 to Participation Agreement dated as of June 17, 2002 (with certain
information omitted pursuant to a grant of confidential treatment and filed separately with the
Securities and Exchange Commission)

Exhibit No.

Description

10.13

(40) Master Lease dated as of April 23, 2002 by and between Citrix Systems, Inc. and Selco

Service Corporation (with certain information omitted pursuant to a grant for confidential
treatment and filed separately with the Securities and Exchange Commission)

10.15*

10.16*

10.17*

10.18*

10.19*

10.20*

(9)

2005 Equity Incentive Plan

(22)

(10)

(11)

(12)

(23)

Amendment to Citrix Systems, Inc. 2005 Equity Incentive Plan

2005 Employee Stock Purchase Plan

2005 Equity Incentive Plan Incentive Stock Option Master Agreement (Domestic)

2005 Equity Incentive Plan Non-Qualified Stock Option Master Agreement (Domestic)

Citrix Systems, Inc. 2005 Equity Incentive Plan Non-Qualified Stock Option Master
Agreement (Domestic)

10.22*

(19)

Form of Restricted Stock Unit Agreement under the Citrix Systems, Inc. 2005 Equity
Incentive Plan

10.23*

(41)

Form of Executive Restricted Stock Unit Agreement under the Citrix Systems, Inc. 2005
Equity Incentive Plan (Time Based Vesting)

10.24*

(21)

Form of Restricted Stock Unit Agreement for Non-Employee Directors under the Citrix
Systems, Inc. 2005 Equity Incentive Plan

10.25*

(15)

Change in Control Agreement dated as of August 4, 2005 by and between Citrix Systems,
Inc. and Mark B. Templeton

10.26*

(16)

Change in Control Agreement dated as of August 4, 2005 by and between Citrix Systems,
Inc. and each of David J. Henshall, David R. Freidman and John C. Burris

10.27*

(25)

Change in Control Agreement, dated as of August 4, 2006, by and between Citrix Systems,
Inc. and Brett M. Caine

10.28

(26)

Amended and Restated Credit Agreement dated as of September 27, 2006 among Citrix
Systems, Inc., Citrix Systems International GmbH, JPMorgan Chase Bank N.A., and certain
other financial institutions

10.29

(17)

Term Loan Agreement dated as of August 9, 2005 by and among Citrix Systems, Inc., Citrix
Systems International GMBH, JPMorgan Chase Bank, N.A., J.P. Morgan Securities Inc. and
certain other financial institutions

10.30*

10.31

10.32*

10.33*

10.34*

10.35*

10.36*

10.37*

10.38*

(18)

(28)

(29)

(32)

(33)

(42)

(43)

(44)

(45)

NetScaler, Inc. 1997 Stock Plan

Type # 3 License Form by and between the Company and Microsoft Corporation dated
September 5, 2007 (with certain information omitted pursuant to a request for confidential
treatment and filed with the Securities and Exchange Commission)

Second Amendment to Citrix Systems, Inc. 2005 Equity Incentive Plan

Employment Agreement dated as of August 14, 2007 by and between Citrix Systems, Inc.
and Peter Levine

XenSource, Inc. 2005 Stock Plan

Citrix Systems, Inc. Executive Bonus Plan

Third Amendment to Citrix Systems, Inc. 2005 Equity Incentive Plan

Fourth Amendment to Citrix Systems, Inc. 2005 Equity Incentive Plan

Form of First Amendment to Change of Control Agreement (Chief Executive Officer)
between Citrix Systems, Inc. and Mark Templeton

Exhibit No.

Description

10.39*

(46)

Form of First Amendment to Change of Control Agreement between Citrix Systems, Inc. and
each of David J. Henshall and David R. Friedman

10.40*

(47)

Form of First Amendment to Employment Agreement between Citrix Systems, Inc. and Peter
Levine

10.41*

(48)

Form of Non-Qualified Stock Option Master Agreement (Domestic)

10.42

10.43*

10.44

(50)

(51)

Omnibus Assumption and Amendment Agreement dated as of May 30, 2007 by and among
Citrix Systems, Inc., Citrix Capital Corp., Peninsula Investment Corp., Selco Service
Corporation, Key Bank National Association, Allied Irish Banks P.L.C. and Key Bank
National Association

Form of Restricted Stock Unit Agreement

Amendment No. 1 to Credit Agreement, dated as of September 19, 2008, among Citrix
Systems, Inc., Citrix International GmbH, JPMorgan Chase Bank, N.A., JP Morgan
Securities, Inc. and certain other financial institutions

21.1

23.1

24.1

31.1

31.2

32.1

*
(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

(11)

(12)

(13)

List of Subsidiaries

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm

Power of Attorney (included in signature page)

Rule 13a-14(a) / 15d-14(a) Certifications

Rule 13a-14(a) / 15d-14(a) Certifications

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

Indicates a management contract or any compensatory plan, contract or arrangement.
Incorporated herein by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 (File
No. 33-98542), as amended.
Incorporated herein by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1 (File
No. 33-98542), as amended.
Incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2004.
Incorporated by reference herein to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2004.
Incorporated by reference herein to Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2004.
Incorporated by reference herein to Exhibit 10.8 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2004.
Incorporated by reference herein to Exhibit 10.11 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2004.
Incorporated by reference herein to Exhibit 10.12 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2004.
Incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2005.
Incorporated by reference herein to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2005.
Incorporated by reference herein to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2005.
Incorporated by reference herein to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2005.
Incorporated by reference herein to Exhibit 2.1 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2005.

(14)

(15)

(16)

(17)

(18)

(19)

(20)

(21)

(22)

(23)

(24)

(25)

(26)

(27)

(28)

(29)

(30)

(31)

(32)

(33)

(34)

(35)

(36)

(37)

(38)

(39)

(40)

Incorporated by reference herein to Exhibit 2.2 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2005.
Incorporated by reference herein to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2005.
Incorporated by reference herein to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2005.
Incorporated by reference herein to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2005.
Incorporated by reference herein to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2005.
Incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2006.
Incorporated by reference herein to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated as of
April 18, 2006.
Incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2006.
Incorporated by reference herein to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2006
Incorporated by reference herein to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2006.
Incorporated by reference herein to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2006.
Incorporated by reference herein to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2006.
Incorporated by reference herein to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated as of
September 27, 2006.
Incorporated by reference herein to Exhibit 2.1 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2006.
Incorporated by reference herein to Exhibit 10.31 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2006.
Incorporated by reference herein to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated as of
October 19, 2007.
Incorporated by reference herein to Exhibit 2.5 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2007.
Incorporated by reference herein to Exhibit 2.6 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2007.
Incorporated by reference herein to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2007.
Incorporated by reference herein to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2007.
Incorporated by reference herein to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated as of
December 12, 2007.
Incorporated by reference herein to Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2007.
Incorporated by reference herein to Exhibit 10.2 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2007.
Incorporated by reference herein to Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2007.
Incorporated by reference herein to Exhibit 10.11 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2007.
Incorporated by reference herein to Exhibit 10.12 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2007.
Incorporated by reference herein to Exhibit 10.13 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2007.

(41)

(42)

(43)

(44)

(45)

(46)

(47)

(48)

(49)

(50)

(51)

Incorporated by reference herein to Exhibit 10.24 to the Company’s Annual Report on Form 10-K for the
year ended December 31, 2007.
Incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2008.
Incorporated by reference herein to Exhibit A to the Company’s Definitive Proxy Statement filed with the
Commission on April 29, 2008.
Incorporated by reference herein to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2008.
Incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2008.
Incorporated by reference herein to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2008.
Incorporated by reference herein to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2008.
Incorporated by reference herein to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2008.
Incorporated by reference herein to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2008.
Incorporated by reference herein to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2008.
Incorporated by reference herein to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2008.

EXHIBIT 31.1

CERTIFICATIONS

I, Mark B. Templeton, certify that:

1.

I have reviewed this annual report on Form 10-K of Citrix Systems, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report,

fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d-15(f)) for the registrant and
we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to

be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial

reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that

occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a

significant role in the registrant’s internal control over financial reporting.

By:

/s/ MARK B. TEMPLETON

Mark B. Templeton
President and Chief Executive Officer
(Principal Executive Officer)

Date: February 27, 2009

EXHIBIT 31.2

CERTIFICATIONS

I, David J. Henshall, certify that:

1.

I have reviewed this annual report on Form 10-K of Citrix Systems, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report,

fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to

be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial

reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that

occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a

significant role in the registrant’s internal control over financial reporting.

By:

/s/ DAVID J. HENSHALL

David J. Henshall
Chief Financial Officer
(Principal Financial Officer)

Date: February 27, 2009

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EXHIBIT 32.1

In connection with the Annual Report of Citrix Systems, Inc. (the “Company”) on Form 10-K for the period

ending December 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the
“Report”), we, Mark B. Templeton, Chief Executive Officer of the Company, and David J. Henshall, Chief
Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, to our knowledge, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of

1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and

results of operations of the Company.

/s/ MARK B. TEMPLETON

Mark B. Templeton
Chief Executive Officer

/s/ DAVID J. HENSHALL

David J. Henshall
Chief Financial Officer

February 27, 2009

Information Concerning Non-GAAP Financial Measures Used in This Annual Report 
(Unaudited)

GAAP diluted earnings per share for the twelve months ended December 31, 2008 was $0.96.  GAAP diluted earnings per 
share for the twelve months ended December 31, 2007 was $1.14. Non-GAAP earnings per share excludes the effects of the 
amortization of intangible assets primarily related to business combinations, stock-based compensation expenses, the write-off 
of in-process research and development, and the tax effects related to those items. In addition, non-GAAP earnings per share 
for 2008 excludes the non-cash beneﬁ t related to the adjustment of payroll taxes related to the investigation of our historical 
stock option granting practices taken in the fourth quarter of 2008. 

GAAP operating margin for the twelve months ended December 31, 2008 was 11% and GAAP operating margin for the three 
months ended December 31, 2008 was 15%.  Non-GAAP operating margin excludes the effects of amortization of intangible 
assets primarily related to business combinations, stock-based compensation expense, the write-off of in-process research and 
development, and the non-cash beneﬁ t related to the adjustment of payroll taxes related to the investigation of our historical 
stock option granting practices taken in the fourth quarter of 2008.

The  following  table  shows  the  non-GAAP  ﬁ nancial  measures  used  in  this  Annual  Report  reconciled  to  the  most  directly 
comparable GAAP ﬁ nancial measures.

Three Months Ended
December 31, 2008

Twelve Months Ended
December 31, 2008

GAAP operating margin

     Add:  stock-based compensation

     Add:  amortization of product related intangible assets

     Add:  amortization of other intangible assets

     Add:  in-process research and development

     Less:  payroll tax beneﬁ t related to stock option 
               investigation

Non-GAAP operating margin

15.2%

8.1%

3.0%

1.4%

0.3%

(1.6)%

26.4%

10.7%

7.9%

3.0%

1.4%

0.1%

(0.4)%

22.7%

Twelve Months Ended
December 31, 2008

Twelve Months Ended
December 31, 2007

GAAP earnings per share — diluted

     Add:  stock-based compensation

     Add:  amortization of product related intangible assets

     Add:  amortization of other intangible assets

     Add:  in-process research and development

     Less:  payroll tax beneﬁ t related to stock option 
               investigation

     Less:  tax effects related to above items

Non-GAAP earnings per share – diluted

$0.96

0.67

0.26

0.12

0.01

(0.03)

(0.36)

$1.63

$1.14

0.35

0.16

0.09

0.05

—

(0.20)

$1.59

Pursuant to the requirements of Regulation G, the Company has provided a reconciliation of each non-GAAP ﬁ nancial measure 
used in this 2008 Annual Report to the most directly comparable GAAP ﬁ nancial measure. These measures differ from GAAP 
in that they exclude amortization and in-process research and development, primarily related to business combinations, stock-
based compensation expenses and the non-cash beneﬁ t related to the adjustment of payroll taxes accrued in connection with 
the Company’s voluntary, independent investigation of historical stock option granting practices that was concluded in 2007 
and the related tax effect of those items. The Company’s basis for these adjustments is described below. 

Management  uses  these  non-GAAP  measures  for  internal  reporting  and  forecasting  purposes,  when  publicly  providing  its 
business outlook, to evaluate the Company’s performance and to evaluate and compensate the Company’s executives. The 
Company  has  provided  these  non-GAAP  ﬁ nancial  measures  in  addition  to  GAAP  ﬁ nancial  results  because  it  believes  that 
these  non-GAAP  ﬁ nancial  measures  provide  useful  information  to  certain  investors  and  ﬁ nancial  analysts  for  comparison 
across accounting periods not inﬂ uenced by certain non-cash items that are not used by management when evaluating the 
Company’s  historical  and  prospective  ﬁ nancial  performance.  In  addition,  the  Company  has  historically  provided  this  or 
similar information and understands that some investors and ﬁ nancial analysts ﬁ nd this information helpful in analyzing the 
Company’s gross margins, operating expenses and net income and comparing the Company’s ﬁ nancial performance to that of 
its peer companies and competitors.

Management  excludes  the  expenses  described  above  when  evaluating  the  Company’s  operating  performance  and  believes 
that  the  resulting  non-GAAP  measures  are  useful  to  investors  and  ﬁ nancial  analysts  in  assessing  the  Company’s  operating 
performance due to the following factors: 

• The  Company  does  not  acquire  businesses  on  a  predictable  cycle.  The  Company,  therefore,  believes  that  the 
  presentation  of  non-GAAP  measures  that  adjust  for  the  impact  of  amortization,  in-process  research  and 
  development and certain stock-based compensation expenses that are primarily related to business combinations, 
  provide  investors  and  ﬁ nancial  analysts  with  a  consistent  basis  for  comparison  across  accounting  periods 
  and, therefore, are useful to investors and ﬁ nancial analysts in helping them to better understand the Company’s 
  operating results and underlying operational trends.

• Amortization costs are ﬁ xed at the time of an acquisition and are then amortized over a period of several years after 

the acquisition and generally cannot be changed or inﬂ uenced by management after the acquisition.

• Although stock-based compensation is an important aspect of the compensation of the Company’s employees and 
  executives, with respect to stock-based compensation expense and its related tax impact, such charges are generally 
  ﬁ xed  at  the  time  of  grant,  are  then  amortized  over  a  period  of  several  years  after  the  grant  of  the  stock-based 

instrument and generally cannot be changed or inﬂ uenced by management after the grant.

• The  non-cash  beneﬁ t  related  to  payroll  taxes  originally  arose  out  of  the  Company’s  voluntary,  independent 
investigation of its historical stock option granting practices but is a beneﬁ t in the current period, the exclusion 
  of which will better help investors and ﬁ nancial analysts understand the Company’s operating results and underlying 
  operational trends as compared to prior periods.

These non-GAAP ﬁ nancial measures are not prepared in accordance with accounting principles generally accepted in the United 
States (“GAAP”) and may differ from the non-GAAP information used by other companies. There are signiﬁ cant limitations 
associated  with  the  use  of  non-GAAP  ﬁ nancial  measures.  The  additional  non-GAAP  ﬁ nancial  information  presented  here 
should be considered in conjunction with, and not as a substitute for or superior to, the ﬁ nancial information presented in 
accordance with GAAP (such as net income and earnings per share) and should not be considered measures of the Company’s 
liquidity.  Furthermore,  the  Company  in  the  future  may  exclude  amortization  and  in-process  research  and  development 
primarily related to new business combinations from ﬁ nancial measures that it releases, and the Company expects to continue 
to incur stock-based compensation expenses.

 
 
 
Note Regarding Forward-Looking Statements

This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, 
as  amended,  and  Section  21E  of  the  Securities  Exchange  Act  of  1934,  as  amended.  Actual  results  could  differ  materially 
from those set forth in the forward-looking statements. In particular, statements contained in this Annual Report for the year 
ended December 31, 2008, and in the documents incorporated by reference into this Annual Report, that are not historical 
facts, including, but not limited to, statements concerning trends in information technology, the ability of Citrix products to
address and capitalize on such trends, potential growth of product markets and plans for generating growth, Citrix’s long-term 
strategies, new products, development and offerings of products and services, market positioning, Application Networking, 
Application  Performance  Monitoring,  Citrix  Delivery  Center,  Desktop  Virtualization,  Server  Virtualization,  Application 
Virtualization,  Subscription  Advantage,  XenApp,  NetScaler,  XenServer  and  XenDesktop,  Citrix  Ready,  Citrix  Essentials, 
Citrix Repeater products and Access Gateway, our Partner Network, Product Licenses, cash and non-cash charges, product 
and price competition, our Online Services division, competition and strategy, customer diversiﬁ cation, employees, suppliers, 
contract  manufacturers,  product  price  and  inventory,  contingent  consideration  payments,  deferred  revenues,  government 
regulation  (including  the  FCC),  seasonal  factors,  natural  disasters,  stock-based  compensation,  licensing  and  subscription 
renewal  programs,  computer  system  enhancements,  international  operations  and  expansion,  revenue  recognition,  proﬁ ts, 
growth of revenues, composition of revenues, cost of net revenues, operating expenses, sales and sales cycle, marketing and 
support expenses, general and administrative expenses, research and development expenses, obsolete materials charges, royalty 
payments, valuations of investments and derivative instruments, technology relationships, open source software, reinvestment 
or  repatriation  of  foreign  earnings,  gross  margins,  amortization  expense,  goodwill  and  intangible  assets,  interest  income, 
interest expense, impairment charges, anticipated operating and capital expenditure requirements, cash inﬂ ows, contractual 
obligations, our Credit Facility, in-process research and development, tax rates and deductions, tax liabilities and beneﬁ ts, SFAS 
No. 109, SFAS No. 123R, SFAS No. 141R, SFAS No. 157, SFAS No. 160, SFAS No. 161, leasing activities and obligations, 
acquisitions, stock repurchases, investment transactions (including our investment in bonds issued by AIG Matched Funding 
Corporation  and  investments  in  auction  rate  and  available-for-sale  securities)  changes  in  domestic  and  foreign  economic 
conditions  and  credit  markets,  restructuring  activities  (including  our  strategic  restructuring  program),  customer  delays  or 
reductions  in  technology  purchases,  liquidity,  litigation  matters,  intellectual  property  matters,  distribution  channels,  stock 
price, payment of dividends, Advisor Rewards program, Microsoft agreements, the Intel agreement, price protection rights, 
proprietary  technology,  security  measures,  third  party  licenses,  and  potential  debt  or  equity  ﬁ nancings  constitute  forward-
looking statements and are made under the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, 
and Section 21E of the Securities Exchange Act of 1934, as amended. 

These statements are neither promises nor guarantees. Our actual results of operations and ﬁ nancial condition have varied 
and could in the future vary materially from those stated in any forward-looking statements. The following factors, among 
others, could cause actual results to differ materially from those contained in forward-looking statements made in this Annual 
Report or presented elsewhere by our management from time to time: adverse changes in general economic conditions in the 
United States or any of the major countries in which we do business, conditions affecting the information technology market, 
long sales, competition, concentration of revenue from Application Virtualization products, emerging nature of Company’s 
Server Virtualization products and services, development of new products and services or enhancements to the Company’s 
existing  products  and  services,  failure  to  renew  agreements  with  Microsoft,  impairment  charges,  loss  of  key  personnel  or 
inability  to  hire  enough  qualiﬁ ed  employees  in  certain  areas  of  the  Company’s  business,  failure  to  manage  operations,  the 
Company’s  restructuring  program,  inability  to  realize  acquisition-related  ﬁ nancial  and  strategic  goals,  attractiveness  of 
acquisition opportunities, impairment of goodwill or intangible assets, inability to expand and diversify distribution channels,
changes in the Company’s licensing programs or subscription renewal programs, concentration of License Updates revenue 
and deferred revenue, international risks, unanticipated changes in tax rates or exposure to additional income tax liabilities,
credit exposure to the Company’s hedging counterparties, limited protection offered by patents, infringement of third-party 
intellectual property rights, use of open source software, reliance on open source software programmers, investment in open 
source Xen hypervisor, development of new XenServer products, enhancement of XenServer products, quality and price of the 
Xen products, outcomes of strategic and technology relationships, loss of access to third-party licenses, products release delays,
ability to attract and retain and further penetrate large enterprise customers, upgrade of the Company’s enterprise resource 
planning system, ability to attract and retain small-sized customers, risks of indirect distribution channels, reliance on third-
party suppliers and contract manufacturers, errors in the Company’s products, restrictions under the Company’s credit facility,
security breaches, evolving regulation of the Web, regulation of the Company’s Audio Services Group, natural disasters or 
other unanticipated catastrophes, availability of funding for product development and acquisitions, stock balancing returns or 
price adjustments exceeding the Company’s reserves, volatility of stock price, changes or modiﬁ cations in ﬁ nancial accounting 
standards, seasonal ﬂ uctuations, and inability to access funds from certain of the Company’s auction rate securities investments, 
as well as other risks detailed in our ﬁ lings with the Securities and Exchange Commission, including our Annual Report on 
Form 10-K for the year ended December 31, 2008, or in the documents incorporated by reference into the Annual Report on 
Form 10-K for the year ended December 31, 2008. Such factors, among others, could have a material adverse effect upon our 
business, results of operations and ﬁ nancial condition. We caution readers not to place undue reliance on any forward-looking 
statements, which only speak as of the date made. We undertake no obligation to update any forward-looking statement to 
reﬂ ect events or circumstances after the date on which such statement is made.

©2009 Citrix Systems, Inc.  All rights reserved. Citrix® is a registered trademark of Citrix Systems, Inc. and/or one or more of 
its subsidiaries, and may be registered in the U.S. Patent and Trademark Ofﬁ ce and in other countries. All other trademarks 
and registered trademarks are property of their respective owners. 

Total Return To Shareholders
(Includes reinvestment of dividends)

Company Name/Index

Citrix Systems, Inc.

S&P 500 Index

Nasdaq Index

Peer Group

Annual Return Percentage
Years Ending

Dec 04

Dec 05

Dec 06

Dec 07

Dec 08

15.60

10.88

8.41

11.29

17.46

4.91

2.20

-1.84

-5.85

15.79

10.26

15.86

40.52

5.49

9.93

15.73

-37.99

-37.00

-40.99

-38.19

Base Period

Indexed Returns
Years Ending

Company Name/Index

Dec 03

Dec 04

Dec 05

Dec 06

Dec 07

Dec 08

Citrix Systems, Inc.

S&P 500 Index

Nasdaq Index

Peer Group

100

100

100

100

115.60

110.88

108.41

111.29

135.78

127.84

179.63

111.39

116.33

134.70

142.10

110.79

122.16

134.29

109.25

126.58

146.49

89.53

79.25

90.55

Peer Group consists of companies with an SIC code of 7372.

[THIS PAGE INTENTIONALLY LEFT BLANK]

[THIS PAGE INTENTIONALLY LEFT BLANK]

Corporate Information

Citrix Systems, Inc. (Nasdaq:CTXS) is the global leader and the most trusted name in application delivery infrastructure. More than
230,000 organizations worldwide rely on Citrix to deliver any application to users anywhere with the best performance, highest 
security and lowest cost. Citrix customers include 100% of the Fortune 100 companies and 99% of the Fortune Global 500, as well 
as hundreds of thousands of small businesses and prosumers. The Citrix Partner Network has approximately 10,000 partners in 
more than 100 countries. Annual revenue in 2008 was $1.6 billion.

Learn more at www.citrix.com.

Corporate and North America 
Headquarters
Ft. Lauderdale, FL, USA

EMEA Headquarters
Schaffhausen, Switzerland

India Development Center
Bangalore, India

Stockholder Information

Online Division Headquarters
Santa Barbara, CA, USA

Silicon Valley Headquarters
Santa Clara, CA, USA

Paciﬁ c Headquarters
Hong Kong, China

Sydney Development Center
Sydney, Australia

Latin America and Caribbean
Headquarters
Coral Gables, FL, USA

UK Development Center
Chalfont, United Kingdom

Corporate Ofﬁ cers

Board of Directors

Investor Relations

Mark B. Templeton
President and Chief Executive Ofﬁ cer

Thomas F. Bogan
Partner, Greylock Partners

Citrix’s stock trades on the NASDAQ Global 
Select Market under the ticker symbol CTXS.

Brett M. Caine
Senior Vice President, 
Online Services Division

Nanci Caldwell
Former Executive Vice President and CMO,
PeopleSoft, Inc.

David R. Friedman
General Counsel and Senior Vice President,
Human Resources

David J. Henshall
Senior Vice President and 
Chief Financial Ofﬁ cer

Peter J. Levine
Senior Vice President, 
Virtualization and Management Division

Al J. Monserrat
Senior Vice President, Sales and Services

Gordon Payne
Senior Vice President, 
Delivery Systems Division

Wes R. Wasson
Senior Vice President and 
Chief Marketing Ofﬁ cer

Murray J. Demo
Former Executive Vice President 
and Chief Financial Ofﬁ cer,
Adobe Systems Incorporated

Stephen M. Dow
General Partner, Sevin Rosen Funds

Asiff S. Hirji
Partner, TPG Capital, L.P.

Gary E. Morin
Former Executive Vice President and 
Chief Financial Ofﬁ cer, 
Lexmark International, Inc.

Godfrey R. Sullivan
President and CEO, Splunk Inc.

Mark B. Templeton
President and Chief Executive Ofﬁ cer,
Citrix Systems, Inc.

Transfer Agent and Registrar

Computershare Trust Company, N.A.
P.O. Box 43021
Providence, RI 02940-3021
Tel: +1 877 282 1168
www.computershare.com

Independent Registered  
Public Accountants

Ernst & Young LLP
100 Northeast Third Avenue, Suite 700
Fort Lauderdale, FL 33301

The Citrix Annual Report and the Annual 
Report on Form 10-K for the year ended 
December 31, 2008 are available electronically 
at www.citrix.com/annualreport.

For further information about Citrix, additional 
copies of this report and the Annual Report 
on Form 10-K (including ﬁ nancial statements 
and  schedules) or other ﬁ nancial information 
without charge, contact:

Citrix Systems, Inc.
Attn: Investor Relations
851 W. Cypress Creek Road
Fort Lauderdale, FL 33309
United States

Tel: +1 954 267 3000
Tel: +1 800 424 8749

www.citrix.com/investors

Annual Meeting of Stockholders

The Annual Meeting of Shareholders of Citrix 
Systems, Inc. will be held on May 29, 2009 
at 9:00 a.m., PST

4988 Great America Parkway
Santa Clara, CA 95054
United States