Dear Citrix Shareholders:

More than two years ago, we launched an aggressive plan to transform Citrix with one goal in mind: to be the leading provider of on-demand access solutions.

We knew this aggressive strategy would require us to expand from a single product offering into a company with a broad portfolio of innovative access solutions. We knew we would have to take the long view, stay focused, invest, and still drive double-digit growth at top-quartile operating margins. We knew we needed to make multi-year investments in our people, our products, our channels, our brand and our geographic footprint. We believed that successful execution would take us through $1 billion in revenue, with sustainability, within a few years.

I am pleased to report that 2004 was an extraordinary year – in our transformation, our growth, and our preparation for the future.

Our 2004 financial results speak for themselves: 26% annual revenue growth to $741 million, more than doubling our 2003 growth rate. Revenues were more diversified than ever, with about 43% coming from software and service subscriptions. Our subscription businesses drove a 36% increase in our deferred revenue balance, which ended the year at $225 million. And we generated $265 million in cash flow from operations, ending the year debt-free with $566 million of total cash and investments on the balance sheet – after retiring over $350 million in convertible debt, allocating nearly $170 million in cash and investments to acquisitions, and acquiring shares under our stock repurchase programs.

Making Customers Successful

Our growth is attributable to one thing: making customers successful with their business goals. Citrix customers are able to run IT more cost-effectively, gain greater business agility, and grow faster. Our solutions help them meet the need for secure remote access, reduce the cost of IT complexity, leverage low-cost Internet connectivity, comply with Sarbanes-Oxley and HIPAA regulations, accelerate the integration of mergers and acquisitions, and expand branch offices faster than ever.

We aim for 100% customer success and 100% satisfaction. In 2004, we achieved a “world-class" customer loyalty rating of 95%, up four points from the previous year. We’re helping our customers see the additional value of standardizing on Citrix access infrastructure as a “mission-critical business system" – one investment that helps them run and grow their businesses more efficiently and effectively.

Product Innovation and Expansion

During the year, we enhanced the Access Suite and expanded our product portfolio with two exciting acquisitions. In the first quarter, we acquired Expertcity, now the Citrix Online division, moving us into the online collaboration, desktop access and on-demand assistance markets. And in the fourth quarter, we added Net6, now the Citrix Gateways division, extending our reach in the SSL VPN and IP telephony markets.

These new and enhanced products allow us to serve the on-demand access needs of customers ranging from individuals to small businesses, and from medium to large enterprises. We’re offering more choice in how customers purchase access solutions from Citrix – now including premises-based software, subscription-based services, and plug-and-play appliances. And we’re also expanding what customers can access with Citrix solutions, ranging from business information to voice applications to collaboration with other people.

In April, we shipped version 3.0 of the Citrix MetaFrame Access Suite, along with the next generation of our flagship product, Citrix MetaFrame Presentation Server, and updates of Conferencing Manager, Secure Access Manager, and Password Manager. This Suite is the most complete solution available for on-demand secure access and offers our unique SmoothRoaming technologies. This is a major set of innovations that give users an “always-on" access experience as they work across devices, locations, and networks – and it’s only available from Citrix. Revenue from these new products, including the Access Suite, grew to over 9% of fourth quarter software license revenue.

The Citrix Online division had a brilliant year, contributing about 6% of total revenues. Citrix GoToMyPC continues as the gold standard in desktop access and grew over 30% last year. Citrix GoToAssist grew by about 70%, making it a leader in on-demand assistance. And Citrix GoToMeeting, introduced in the second quarter, instantly began winning customers from the leaders in the web-based collaboration market. In 2004, our online products won 11 awards, including Forrester’s “Innovative Communications Technology Award" and, for the second consecutive year, PC World’s “World-Class Award."

We’re equally excited by the prospects for Citrix Gateways. We believe our low-cost, simple-to-use Access Gateway appliance is superior to any VPN available today, whether IPsec or SSL. We plan to go even further by combining the Access Gateway with our Secure Access Manager software to deliver enterprise-class secure access. This powerful combination will introduce Citrix SmartAccess – a capability that can automatically sense who you are, where you are, what device you’re using, and what security protections it has – then dynamically respond with the appropriate access privileges, delivering an optimized access experience while rigorously protecting the security of corporate information.

Channel Partner Success and Expanded Alliances

It takes committed, talented business partners to ensure the success of our customers. Last year, we invested in the programs aimed at making Citrix the best business opportunity for our worldwide reseller partners. During the first quarter, we launched the Citrix accessPARTNER network, uniting all of our go-to-market relationships into one program. To further energize our partners, we created a new partner incentive program, called Advisor Rewards, which rewards partners for demand generation and solution-selling. Advisor Rewards has gained additional traction with our partners every quarter.

Our go-to-market relationships extend well beyond our resellers. In fact, about 1,800 companies work with Citrix to enhance our products, amplify our message and support our mutual business strategies. Our relationships with SAP, HP and IBM took major steps forward in 2004, supporting our growth, especially with larger customers.

In 2004, we also signed a five-year Technology Collaboration Agreement with Microsoft that will take us well into the next generation of the Windows Server platform, code-named “Longhorn." The agreement and our consistent engagement give us the right level of technical, marketing, and executive dialog with Microsoft as we extend their platform with maximum value for our customers.

Secure, managed access is core to every business initiative – from modernizing, centralizing, and optimizing how businesses run, to mobilizing, simplifying, and transforming the way businesses grow. That’s why so many companies are seeing secure access as a strategic imperative. It’s why industry analysts see a $22 billion access infrastructure market by 2007. And it’s why we are bullish about growth.

Thank you for your trust and for joining us on this exciting journey. We’re carefully managing the business to deliver strong results and at the same time, paving the way for long-term, sustainable growth.

We’ve come a long way together, and there’s no stopping us now.

Mark B. Templeton
President and CEO