UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

For the fiscal year ended December 31, 20042007

or

Commission File Number 0-27084

CITRIX SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

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:

None

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  ¨    No  x

Common Stock, $.001 Par Value

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

the Act.    Yes  ¨    No  x

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  x    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.  x¨

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.

Indicate by checkmark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2)12b-2 of the Act).    Yes  x¨    No  x¨

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 NationalGlobal Select Market as of such date) was $3,464,675,126.$6,026,508,654. As of March 8, 2005February 20, 2008 there were 169,486,037185,289,377 shares of the registrant’s Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The information requiredregistrant intends to file a proxy statement pursuant to Regulation 14A within 120 days of the end of the fiscal year ended December 31, 2007. Portions of such proxy statement are incorporated by reference into Part III of this report is incorporated by reference from the Company’s definitive proxy statement, relating to the annual meeting of stockholders to be held in May 2005, pursuant to Regulation 14A to be filed with the Securities and Exchange Commission.Annual Report on Form 10-K.

CITRIX SYSTEMS, INC.

TABLE OF CONTENTS

ITEM 1.    PART IBUSINESS

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 10.

General

Citrix Systems, Inc. (“Citrix” or the “Company”), is a Delaware corporation founded on April 17, 1989. The Company designs, developsWe design, develop and markets access infrastructure software, servicesmarket technology solutions that allow applications to be delivered, supported, and appliances. The Company marketsshared on-demand with high performance, enhanced security, and licenses itsimproved 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 its websites. The Company also promotes its products through relationships with a wide variety of industry participants, including Microsoft Corporation (“Microsoft”).

original equipment manufacturers, or OEMs.

Business StrategyOverview

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 more than a decade, since the completion of our initial public offering in December 1995.

Citrix is committed to achieving its vision of making every organization an on-demand enterprise where information is securely, easily and instantly accessible from virtually anywhere using any device. The Company’s business strategy leverages its ability to create and lead new markets through innovation and execution in all phases of product development, marketing and fulfillment.

The Company’s first waveOur three main waves of innovation in the mid-1990s, enabled the virtualization of the Windows desktop, which made thin-client computing possible. The Company’s second wave of innovation, in the late-1990s, enabled the virtualization and centralization of most application types, making server-based computing possible. The Company’s third and ongoing wave of innovation is focused on creating access infrastructure that connects devices, networks and applications intohave had a core business system that makes on-demand computing a reality.

Citrix Access Infrastructure as a Core Business System

The Company believes that access infrastructure has the potential of being viewed as a core business system because it solves a core business problem: getting the right information securely, easily and instantly to everyone who needs it, when they need it, wherever they are. This is becoming more difficult to accomplish as more and more people conduct business in remote and mobile situations – unpredictably moving from location to location, using multiple access devices, and connecting with a wide range of heterogeneous applications over wired, wireless and Web networks.

To meet this challenge, Citrix’s access infrastructure addresses one of the basic technical challenges businesses face today: the need to provide secure access to private information over both trusted and untrusted networks. Access infrastructure accomplishes this by connecting devices, networks and applications into a system that provides secure, easy and instant access to virtually any information source, for any authorized user, from virtually anywhere, using any connection.

The Company believes that its Citrix access infrastructure helps to transform any organization into an on-demand enterprise. This means that, for a single investment in access infrastructure, businesses get two key benefits: improved operational efficiency that reduces the cost of running Citrix’s business, and accelerated agility that enables the business to capitalize on more opportunities for growing the business.

When used together, Citrix access infrastructure products, including software, services and appliance-based solutions provide a set of capabilities that meet the access needs of end-userssignificant impact on the demand side of the information supply chain, as well as the needs of IT administrators on the supply side of the information supply chain. These capabilities include:industry:

During this period, our revenues have grown from $527.4 million in 2002 to $1.39 billion in 2007.

Today, we design, develop, market, sell and support multiple products in an IT market category called Application Delivery Infrastructure. Our product family brand, announced in early 2008, for all our infrastructure solutions is the Citrix Delivery Center. These products include solutions for application, server and desktop virtualization, Web application optimization, application performance monitoring, branch office application delivery and wide area network, or WAN, optimization, secure sockets layers/virtual private network, or SSL/VPN, gateways, and Internet Protocol, or IP, telephony.

We also offer our GoTo services - GoToMyPc^®, GoToMeeting^®, GoToAssist^®, GoToWebinar^™ and all their variants, collectively called Online Services - through our Online Services Division.

Products

Citrix Delivery Center is designed to offer comprehensive solutions across all dimensions of application, server and desktop virtualization as well as application and network optimization. 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 (“IT”) staffsbudgets and fast-changing business needs the strategic, architectural approach to deliver, manage, monitorapplication, server and measure enterprise resources on demand.desktop delivery that we offer has the capacity to enable business change.

We package and market complete application, server, desktop virtualization solutions and related services as Citrix customers are able to run IT asDelivery Center. Internally, we organize our products into four principal groupings: Delivery Systems, Virtualization and Management Systems, Online Services and Technical Services. This overview provides a corporate computing utility, providing software as a service. This simplifies the complexity and reduces the costs of deploying and administering hundreds of heterogeneous applications and delivering them to end-users on demand virtually anywhere, anytime, to any device, over any connection.

In the MetaFrame Access Suite, each component product solves a particular access challenge for an organization, while alldiscussion of the major products work together seamlesslyand service offerings in these areas.

Delivery Systems

Our Delivery Systems are focused on developing and marketing technologies, solutions and products to enable the on-demand enterprise.build on our leadership in application virtualization, application networking and desktop virtualization.

Application Virtualization

password changes. MetaFrame Password Manager saves end-users time and saves businesses money by lowering help-desk support costs.

Collectively, these products accounted for approximately 50%, 63% and 69% of the Company’s net revenues in 2004, 2003 and 2002, respectively and are included in software licenses revenue in the accompanying consolidated statements of income.Application Networking

Citrix Online Servicesincreased application availability.

In February 2004, the Company acquired Expertcity.com, Inc. (“Expertcity”), a market leader in Web-based desktop access as well as a leader in Web-based training and customer assistance products. During 2004, Expertcity was integrated into the Company as the Citrix Online division. The Company’s portfolio of access services now includes the following:

Citrix Online services accounted for approximately 6.0% of the Company’s net revenues in 2004 and is included in services revenue in the accompanying consolidated statements of income.

Citrix Access Gateway ProductsDesktop Virtualization

In December 2004, the Company acquired Net6 Inc., a leader in providing secure access gateways. Beginning in 2005, the Company’s portfolio of access gateway appliances will include:

Virtualization and Management Systems

Our Virtualization and Management Systems are focused on developing and marketing technologies and solutions and products for server virtualization, and application performance monitoring.

Server Virtualization

Application Performance Monitoring

In 2008, we expect to add a key new product to Citrix Delivery Center which will allow customers to orchestrate communications between multiple Citrix Delivery Center products, called Citrix Workflow Studio. It will allow a simpler and faster integration of Citrix products as well as support third-party solutions.

CitrixOnline Services

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

Citrix provides

Technical Services

We provide a portfolio of services designed to allow the Company’s end-customersour customers and entities with which it haswe have a technology relationship to maximize the value of our Citrix access infrastructure software.Delivery Center solutions. These services are available as a feature of the Company’sour business-development program and are available for additional fees to end-customers.customers.

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, Tokyo, 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 accountedinclude on-site systems design and implementation services targeted primarily at enterprise-level clients with complex IT environments. Citrix Consulting is also responsible for approximately 8%the development of the Company’s net revenues in 2004, 2003best practice knowledge that is disseminated to businesses with which we have a business relationship and 2002end-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. Citrix product training is available to businesses, end-users and partners online and through our CALCs. CALCs are included in services revenue in the Company’s accompanying consolidated statements of income.

staffed with instructors that have been certified by us and teach their students using Citrix-developed courseware. Online eLearning is accessible through our Website.

Citrix Technology

CitrixOur products are based on a full range of industry-standard technologies. In addition, some Citrixcertain of our products are also include the Company’sbased on our proprietary technologies known as theincluding our Independent Computing Architecture, (“ICA”)or ICA, protocol.

The ICA® protocol whichis a core technology in application virtualization that allows an application’s graphical end-user interface to be displayed on virtuallymost any client device while the application logic is executed on a central server. Because the ICA^® protocol moves client-basedCentralizing application processing toon the server this approach enables centralized management of applications, end-users, servers, licenses and other system components for greater efficiency and lower cost.

The Company’sOur ICA^® technology also minimizes the amount of data traveling across an end-user’s network as onlyby limiting the data transported to and from the client device to encrypted screen refreshes, keystrokes and mouse clicks are transported to and from the client device.clicks. This increases remoteenhances access security, improves application performance, lowers bandwidth consumption, and allows even wireless access tolowers the TCO for deploying and accessing the latest, most powerful applications and information.

CitrixOur products are also based on the industry-standard Extensible Markup Language, (“XML”).or XML. Leveraging our XML technology assures open systems interaction for customers regardless of data source or platform. And byBy supporting XML, which is thean important standard for future Web services-based applications, Citrix helpswe help customers get from the client/server world of today to the Web services environments of tomorrow.

In October 2007, in conjunction with the acquisition of XenSource, we acquired commercial hypervisor products built on the Xen® open source technology. The Xen® hypervisor is a key component of the Citrix® XenServer™ product line. See “Risk Factors,” for more information regarding the open source technology.

Citrix 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 currently, the five primary IT buyers involved in decision-making related to application delivery solutions are:

Citrix offers a portfolio

In addition to these five primary IT buyers, we market and sell access and collaboration software and services that targetto consumers, prosumers and small mediumbusinesses through our Online Services division. Our Online Services division also markets and large sized organizations in the commercial, governmentsells Web-based remote support systems to corporate help desks.

We offer perpetual and education sectors. Currently, Citrix has more than 160,000 customers worldwide, including 100% of theFortune100, 99% of theFortune500 and 97% of theFortune Global 100.

The Company offers perpetualterm-based software licenses for MetaFrame Access Suiteour Delivery Systems and Virtualization and Management Systems products, along with annual subscriptions for Web-based Citrix Online services,software maintenance, technical support and beginning in 2005 specialized hardware appliances for Citrix Access Gateway products.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 software versions if and when any updates are delivered during the maintenance term. Perpetual license software products come in both “shrink wrapped” andshrink-wrap and/or electronic-based forms. The Company distributes the software in various formats including traditional “boxed” packages for small projects and customers and electronically downloaded formats for its large projects and enterprise customers. The Company’s Web-based servicesforms to meet customer form factor requirements. Our Online Services products can be accessed over anythe Internet connection during the subscription period. Hardware appliances come pre-loaded with software for which customers can purchase perpetual licenses.

Technology Relationships

The Company hasWe have entered into a number of technology relationships to develop customer markets for itsour products broaden the use of the ICA protocol as an industry standard technology for distributed Windows and non Windowsnon-Windows applications and to accelerate the development of itsour existing and future product lines.

Microsoft

Microsoft.Since itsour inception, the Company haswe have had a number of license agreements with Microsoft, including licenses relating to Microsoft OS/2, Windows 3.x, Windows for Workgroups, Windows NT^®NT®, Windows CE and Internet Explorer. These agreements have provided the Companyus with access to certain Microsoft source and object code, technical support and other materials.

In May 1997, the Company entered into a five-year joint license, development and marketing agreement with Microsoft, (as amended, the “Microsoft Development Agreement”), pursuant to which the Company We also have licensed itsour multi-user Windows NT extensions to Microsoft for inclusion in future versions of Windows NT server software. Pursuant to the Microsoft Development Agreement, the Company’s multi-user Windows NT extensions technology was incorporated into Microsoft’s NT Terminal Server, which was released in July 1998, and Windows 2000 Server which was released in February 2000.and successor products.

In May 2002, the Company signed an agreement with Microsoft to provide the Company with access to Microsoft Windows Server source code for current and future Microsoft Server operating systems, including access to Windows Server 2003 and terminal services source code, during the three year term of the agreement. This agreement was terminated in December 2004 and did not provide for payments to or from Microsoft.

In December 2004, the Companywe entered into a technology collaboration agreement with Microsoft to further enhance the overall extensibility of Windows^®Windows® Terminal Server. In conjunction with the technology collaboration agreement, the Companywe and Microsoft entered into a patent cross license and source code licensing agreements to renew the Company’sour access to source code for current versions of Microsoft Windows Server that had previously been provided to the Companyus pursuant to the agreement between Microsoft and the Companyus dated May 2002. The technology collaboration agreement also provides forus access by the Company to the source code for the forthcoming Microsoft Windows Server codenamed “Longhorn.2008, formerly code named “Longhorn,” 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.

In November 2007, we entered into a development agreement and certain licenses with Microsoft whereby we will develop and distribute a range of Windows-based appliances for branch offices. These appliances provide WAN optimization functionality as well as consolidate a range of functions that would normally be carried out by discrete servers in a branch. We anticipate beginning shipments of the appliances being developed under these agreements in the second half of 2008.

There can be no assurances that the Company’sour 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 the Company.us. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Certain Factors Which May Affect Future Results.”“Risk Factors” for more information on our agreements with Microsoft.

Additional Relationships.Relationships

As of December 31, 2004, the Company2007, we had entered into approximately 100230 ICA license agreements. 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 Neoware,Company, Fujitsu MaxSpeedLimited, Philips Speech Recognition Systems and SAP AG, among others.

In addition, the Citrix accessPARTNER network includesPartner Network™, including Citrix Global Alliance Partners^™Partners™, which areis a coalition of industry-leadingapproximately 8,000 companies from across the IT spectrum who work with the Company tothat design and market solutions that are complementary solutions for the Company and the customers of Citrix Alliance Partners. The Company’s existing alliance and channel programs, includingto the Citrix Business Alliance, are now includedproduct family. A new initiative called Citrix Ready™ was introduced in 2007 as part of the Citrix accessPARTNER network.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. Citrix Ready not only demonstrates current mutual product compatibility, but it may also increase the probability of future interoperability. For further information on the Citrix accessPARTNER networkPartner Network see “— Sales, Marketing and Support.” By the end of 2004, the number of Citrix Alliance Partners had grown to approximately 1,800 members, including hardware, software, global and regional consulting alliances. Citrix Premier Plus Alliance Partners include Microsoft, Dell, IBM, EMC², Hewlett-Packard, Siebel Systems, SAP AG, Sun Microsystems and Oracle.

Research and Development

The Company focuses itsWe focus our research and development efforts on developing new products and core technologies for its access infrastructure marketsin the Application Delivery Infrastructure market and further enhancing the functionality, reliability, performance and flexibility of existing products. In 2004, the Company2005, we acquired additional expertise in Web-based services, telephony, voice over internet protocolWeb application optimization, Transmission Control Protocol, or TCP, multiplexing, multi-protocol compression, SSL acceleration, application traffic management, dynamic caching, and secure access appliances. The Company solicitsWeb application firewall technologies. In 2006, we acquired additional expertise in tools that monitor the end-user experience, WAN optimization and acceleration. In 2007, we acquired expertise in server and desktop virtualization. We solicit extensive inputfeedback concerning product development from end-users,customers, both directly from end-customers and indirectly through itsour channel distributors.

The Company believesWe believe that itsour software development team and core technologies represent a significant competitive advantage for the Company.us. Included in the software development team is a group focused on research activities that include prototyping ways to integrate emerging technologies and standards into the Company’sour product offerings, such as emerging Web services technologies, management standards and Microsoft’s newest Windows Server technologies. OtherMany groups within the software development team have expertise in XML-based software development, integration of acquired technology, multi-tier Web-based application development and deployment, SSL secure access and secure sockets layers-based (“SSL”) secure access. The Company maintainsbuilding software as a service. We maintain a team working on-site at Microsoft focused on enhancing and adding value to the next generation of Microsoft Windows Server, productsvirtualization and operating systems.

The software development team also includes a number of key employees who were instrumental in the release of Microsoft’s Window’s NT 4.0 Terminal Server Edition, have expertise in current Microsoft and UNIX operating system environments (Solaris, AIX, HP-UX, and Linux), and were key members from the engineering team that developed the original version of OS/2 at IBM. During 2004, 2003 and 2002, the Companymanagement products. We incurred research and development expenses of approximately $86.4$205.1 million $64.4in 2007, $155.3 million in 2006 and $68.9$108.8 million respectively.

in 2005.

Sales, Marketing and Support

The Company marketsWe market and licenses itslicense our products and services primarily through multiple channels worldwide, including value added resellers,VARs, channel distributors, system integrators (“SI”s)SIs and independent software vendors (“ISV”s),ISVs managed by the Company’sour worldwide sales force. The Company providesWe provide training and certification to integrators, value-added resellersVARs and consultants for a full-range of Citrix-based application deployment and managementinfrastructure products, solutions and services through its accessPARTNER network.

As of December 31, 2004, the Company had relationships with approximately 90 distributorsour Citrix Partner Network. In addition, our Online Services division provides software as a service through direct sales and approximately 4,700 Citrix Solution Advisors worldwide. A number of entities with which the Company has channel relationships provide additional end-customer sales channels for the Company’s products under either a Citrix brand or embedded in the licensee’s own software product. For information regarding entities with which the Company has technology relationships, including Citrix Alliance Partners, see “— Technology Relationships.”

our Websites.

In 2004,2007, we continued to focus our efforts on increasing the Company established the global networkproductivity of our existing partners, called Citrix accessPARTNER. This network spans the system integrators, value-added distributors, resellers, allianceintegrating partners developers,from our recent acquisitions into our program, and certifiedbuilding capacity through recruitment of new partners to sell and education professionals who advise on,implement our expanding product portfolio, including an effort to recruit partners to sell and implement and provide training for Citrix products and services. At the core of this community are the Citrix Solution Advisors who deliver strategic and successful access infrastructure solutionsXenServer, our server virtualization product. We continue to Citrix

customers. Early in 2004, the Company introduced a newsee success with our innovative channel incentive program, called Citrix Advisor Rewards designed to rewardRewards. The Citrix Advisor Rewards™ program is an innovative influencer program that rewards our partners for registering projects submitting forecasts early in the sales process, and providing value-based solutions around Citrix access infrastructure.

The Companyvalue-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 takestake actions to improve the effectiveness of our partner programs, and to strengthen itsour channel relationships, including eliminatingmanaging non-performing partners, adding new partners with expertise in selling into new markets, and forming additional relationships with global and regional SIs and ISVs. During 2004 and 2003, the Company particularly focused on streamlining and simplifying sales processes, improving channel incentive programs to reward solution-selling, and training. The Company combined its existing channel programs, including the Citrix Solutions Network^™, into the Citrix accessPARTNER network, a single, global network that spans the solution advisors, SIs, value-added distributors, resellers, alliance partners, and certified education professionals who advise on, sell, implement and provide training for the Citrix MetaFrame Access Suite and related products and services. At the core of this community are Solution Advisors — value-added resellers who deliver strategic and successful access infrastructure solutions for customers. SIs and ISVs are becoming a more central part of Citrix’sour strategy in the large enterprise and government markets. The SI program includes members such as IBM, HP,Accenture Ltd., Atos Origin, Computer Sciences Corporation, Electronic Data Systems Corporation, Schlumberger, SiemensFujitsu-Siemens Computers GmbH, Hewlett-Packard Company, IBM Global Services, Infosys Technologies Limited, TATA Consultancy Services Limited and Northrop Grumman.WiPro Technologies 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 Amdocs, Cerner Dell,Corporation, Epic Systems Corporation, ESRI, Hyperion Solutions Corporation, McKesson Corporation, Microsoft, Oracle Corporation, Sage Group plc, SAP AG and Siemens Medical Health Solutions, Reynolds & Reynolds, ESRI and Ericsson, among many others.

The Company’sOur sales and marketing organization actively supports itsour distributors and resellers. The Company’sOur sales organization consists of field-based systems sales engineers and corporate sales professionals. Additional sales personnel, based in North America, Europe, Africa, Asia, Australia and South America,all over the world support these field personnel. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” and Note 12 to the Company’s Notes to Consolidated Financial Statements for information regarding the Company’s segments. These additional sales personnel recruit prospective customers, provide technical advice with respect to the Company’sour products and work closely with key distributors and resellers of our products. Over the Company’s products. During 2004 and 2003, the Company grew its saleslast five years, we have grown our force of sales professionals that work closely with partners to sell to mediumprimary IT buyers, including Strategic IT Executives, Network Architects, IT Infrastructure Managers, Desktop Operations Managers and large enterprise customersServer Operations Managers to achieveaddress the appropriate combination of relationships for licensing, integrationmultiple selling and consulting to meet customers’ needs.buying opportunities presented by our expanded product line. These and other account penetration efforts are part of the Company’sour strategy to increase the usage of our Citrix softwareDelivery Center products within theour customer’s IT organization.

The Company’sOur marketing department provides training, sales event support, sales collateral, advertising, direct mail and public relations coverage to itsour indirect channels to aid in market development and in attracting new customers. In 2003, the Company launched a multi-million-dollar, worldwide advertising campaign. Beginning September 2003,addition, marketing for our Online Services division utilizes multiple venues including radio, television and extending throughout 2004 and into 2005, this multi-media campaign combines CIO-targeted and customer-focused print, Web, billboard and radio advertisements to raise Citrix’s brand awareness using the CIOs of household-name customers to describe the benefits of becoming an on-demand enterprise with Citrix access infrastructure.

online advertising.

The Company providesCitrix 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 itsour distributors with stock balancingstock-balancing and price protection rights. These transactions are estimated and provided for at the time of sale as a reduction of revenue. Stock balancing rights permit distributors to return products to the Companyus up to the forty-fifth day of the fiscal quarter, subject to ordering an equal dollar amount of our other Citrix products prior to the last day of the same fiscal quarter. The Company isWe are not obligated to accept product returns from itsour distributors under any other conditions, unless the product item is defective in manufacture. Product items returned to the Companyus under the stock-balancing program must be in new, unused and unopened condition. Price protection rights require that the Companywe grant retroactive price adjustments for inventories of Citrixour products held by distributors or resellers if the Company lowers itswe lower our prices for such products. In the event that the Company decideswe decide to reduce itsour prices, itwe will establish a reserve to cover exposure to distributor inventory. The Company hasWe have not reduced and hashave no current plans to reduce the prices of itsour products for inventory currently held by distributors or resellers. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies”Policies and Estimates” and Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K for the Company’s Notes to Consolidated Financial Statementsyear ended December 31, 2007 for information regarding the Company’sour revenue recognition policy.

Except for the Web-based desktop access services offered by the Citrix Online division, the Company’s 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, Tokyo and Australia. In most cases, the Company provides technical advice to channel distributors and entities with which the Company has a technology relationship, who act as the first line of technical assistance for end-customers. In some cases, end-customers 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, the Company also provides free technical advice through on-line support systems, including its 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 Citrix has a business relationship and end-customers through training and written documentation. Leveraging these best practices enables the Company’s integration resellers to provide more complex systems, reach new buyers within existing customer organizations and provide more sophisticated system proposals to prospective customers. Training services for business, end-customers and partners are provided through the Company’s CALC program and eLearning. CALCs are staffed with instructors that have been certified by Citrix and teach their students using Citrix-developed courseware. Over 300 of the world’s leading IT training organizations are CALCs. eLearning is available through both CALCs and from Citrix’s website.

Operations

The Company controlsWe control all purchasing, inventory, scheduling, order processing and accounting functions related to itsour operations. Production,For our Application and Server Virtualization products, including our XenServer product, and our Application Performance Monitoring 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 the Company’sour facilities. In some cases, independent contractors also duplicate CD-ROMs, print documentation and package and assemble productproducts to our specifications. Production, final test, warehousing and shipping for our Application Networking products, including our NetScaler products and Access Gateway products are primarily performed by a third-party contract manufacturer. For our WANScaler products, we assemble, final test, warehouse and ship the Company’s specifications. To date, the Company has not experienced any material difficulties or delays in the manufacturefinal products to our customers.

For our Application and assembly of its products. InternalServer Virtualization products and our Application Performance Monitoring products, internal manufacturing capabilities and independent contractors provide a redundant source of manufacture and assembly. For our Application Networking products, including our NetScaler, Access Gateway and WANScaler products, internal manufacturing capabilities and independent contractors provide us with the flexibility needed to meet our customer product and delivery requirements. To date, we have not experienced any material difficulties or significant delays in the manufacture and assembly of our products.

The CompanyWe do not believe that backlog, as of any particular date, is a reliable indicator of future performance. While it is generally ships productsour practice to promptly ship product upon receipt of properly finalized purchase orders, we sometimes have orders that have not shipped or have otherwise not met all the required criteria for revenue recognition. 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 order. As a result,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 Company does not have significant backlog at any given time, and does not consider backlogimmediately preceding fourth quarter. This trend is expected to be a significant indicatorcontinue through the first quarter of future performance.

2008. In addition, our European operations generally provide 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. For example, our ability to market our Application Virtualization products, including XenApp and XenApp Platinum and other future product offerings, 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.

Existing or new products and services that provide alternatives to our products and services, including those relating to application, server and desktop virtualization, Web application optimization, application performance monitoring, branch office application delivery, WAN optimization, SSL/VPN, 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 Adobe Systems, Inc., Cisco Systems, Inc., F5 Networks, Inc., Hewlett-Packard Company, IBM Corporation, Juniper Networks, Inc., Microsoft Corporation, Oracle Corporation, Riverbed Technology, Inc., Sun Microsystems, Inc., VMware, Inc., and Virtual Iron Software, Inc.

As the markets for the Company’sour products and services continue to develop, additional companies, including Microsoft and other companies with significant market presence in the computer hardware,appliances, software and networking industries, could enter the markets in which the Company competeswe compete and

further intensify competition.

In addition, alternative products for secure, remote accesswe believe price competition could become a more significant competitive factor in the Internet softwarefuture. As a result, we may not be able to maintain our historic prices and hardware markets directly and indirectly compete with the Company’s current products and anticipated future product offerings. Existing or new products that extend Internet software and hardware to provide Web-based information and application access or interactive computing can materially impact the Company’s ability to sell its products in this market. The Company’s competitors in this market include Cisco, Juniper Networks, Oracle, Sun Microsystems, WebEx Communications, Inc. and other makers of secure remote access solutions.

See “— Technology Relationships” and “Management’s Discussion and Analysis of Financial Conditions and Results of Operations — Certain Factors Which May Affect Future Results.” The announcement of the release, and the actual release, of products competitive to the Company’s existing and future product lines,margins, which could cause existing and potential customers of the Company to postpone or cancel plans to license certain of its existing and future product offerings, which would adversely impact the Company’saffect our business, results of operations and financial condition. See “— Technology Relationships” and “Risk Factors.”

Proprietary Technology

The Company’sOur success is dependent upon certain proprietary technologies and core intellectual property. The Company hasWe have been awarded a number of domestic and foreign patents and hashave a number of pending patent applications in the United States and foreign countries. The Company’sOur technology is also protected under copyright laws. Additionally, the Company relieswe rely on trade secret protection and confidentiality and proprietary information agreements to protect itsour proprietary technology. The Company hasWe have trademarks or registered trademarks in the United States and other countries, including Citrix^®Citrix®, ICA^®Citrix Presentation Server™, MetaFrame^®Citrix Access Gateway™, MetaFrameXP^®Citrix Password Manager™, GoToMyPC^®GoToMeeting®, GoToAssist^TM®GoToAssist®, GoToMeeting^TMGoToMyPC®, GoToWebinar™, ICA®, NetScaler®, WanScaler™, and the Citrix^® logo.

Xen®. While the Company’sour competitive position could be affected by itsour ability to protect itsour proprietary information, the Company believeswe believe that because of the rapid pace of technological change in the industry, factors such as the technical expertise, knowledge and innovative skill of the Company’sour management and technical personnel, itsour technology relationships, name recognition, the timeliness and quality of support services provided by the Companyus and itsour ability to rapidly develop, enhance and market software products could be more significant in maintaining the Company’sour competitive position. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Certain Factors Which May Affect Future Results.“Risk Factors.”

Available Information

The Company’sOur Internet address is http://www.citrix.com. The Company makesWe make available, free of charge, on or through the Company’s website itsour Website our annual reportreports 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 SEC.

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, 2007.

Employees

As of December 31, 2004, the Company2007, we had 2,6564,620 employees. The Company believes itsWe believe our relations with employees are good. In certain countries outside of the United States, the Company’sour relations with employees are governed by labor regulations.

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, 2007, and in the documents incorporated by reference into this Annual Report on Form 10-K for the year ended December 31, 2007, that are not historical facts, including, but not limited to statements concerning new products, product development and offerings, Application Networking, Application Virtualization, Subscription Advantage, XenApp (formerly Presentation Server), NetScaler, XenServer and XenDesktop, Citrix Ready, WANscaler and Access Gateway, our Partner Network historical stock option granting practices and related restatements, stockholder derivative actions, cash and non-cash charges, contingent liabilities related to Internal Revenue Code Section 409A, product and price competition, auction rate securities our Online Services division, competition and strategy, customer diversification, employees, suppliers, product price and inventory, contingent consideration payments, deferred revenues, economic and political market conditions, potential government regulation, seasonal factors, natural disasters, stock-based compensation, licensing and subscription renewal programs, international operations and expansion, revenue recognition, profits, growth of revenues, composition of revenues, cost of revenues, operating expenses, sales and sales cycle, marketing and support expenses, general and administrative expenses, research and development expenses, valuations of investments and derivative instruments, technology relationships, 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 and Term Loan, in-process research and development, advertising campaigns, tax rates and deductions, SFAS 123R, leasing and subleasing activities, acquisitions, stock repurchases, investment transactions, liquidity, litigation matters, intellectual property matters, distribution channels, stock price, payment of dividends, Advisor Rewards Program, Microsoft agreements; 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, 2007, in the documents incorporated by reference into this Annual Report on Form 10-K for the year ended December 31, 2007 or presented 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.

ITEM 2.    PROPERTIESThe virtualization products and services we acquired in connection with our acquisition of XenSource are based on an emerging technology, and therefore the potential market for this line of products and services remains uncertain.

We acquired XenSource in October 2007 to enter the server and desktop virtualization markets. The virtualization products and services that we acquired as part of this acquisition 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 limited operating history of XenSource prior to our acquisition and the relatively limited extent to which server and desktop virtualization solutions have been adopted may make it difficult to evaluate this technology’s impact on our business because the potential market for these products and services remains uncertain. To the extent that the server and desktop 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.

The benefits we anticipate from acquiring XenSource may not be realized.

We acquired XenSource with the expectation that the acquisition will 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. We expect that the acquisition will move us into adjacent server and desktop virtualization markets that 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.

In addition, we may not achieve the anticipated benefits of our acquisition of XenSource as rapidly as, or to the extent, anticipated by our management and certain financial or industry analysts, and others may not perceive the same benefits of the acquisition as we do. For example, XenSource’s contribution to our financial results may not meet the current expectations of our management for a number of reasons, including the integration risks described above, and could dilute our profits beyond the current expectations of our management. Operations and costs incurred and potential liabilities assumed in connection with our acquisition of XenSource also could have an adverse effect on our business, financial condition and operating results. If these risks materialize, our stock price could be materially adversely affected.

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

The Company’sdemand 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. In the past, adverse economic conditions decreased demand for our products and negatively impacted our financial results. Future economic projections for the information technology sector are uncertain. If an unfavorable information technology spending environment develops, 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:

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 Adobe Systems, Inc., Cisco Systems, Inc., F5 Networks, Inc., Hewlett-Packard Company, IBM Corporation, Juniper Networks, Inc., Microsoft Corporation, Oracle Corporation, Riverbed Technology, Inc., Sun Microsystems, Inc., VMware, Inc. and Virtual Iron Software, Inc.

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 products within our Application Virtualization product line 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 products within our Application Virtualization product line 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:

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.

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:

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:

For example, we cannot guarantee that our Citrix Delivery Center and Online Services products 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 server 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 products and enhancements.

If we lose key personnel or cannot hire enough qualified employees, 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. 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. If any of those employees leave, we will need to attract and retain replacements for them. We also need to add key personnel in the future. 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 or fail to continue to effectively control expenses, 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. To manage our current growth and any future growth effectively, 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:

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. For example, due to our recent acquisitions and the anticipated growth of the acquired companies, we currently expect that our future revenue will include a greater level of revenue from appliance sales as compared to our historical level of appliance sales, which we expect will reduce our gross margins from their historical levels. Furthermore, as our income from the recent acquisitions increases, we expect that our effective tax rate may increase due to the taxable income from these 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.

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. In addition, over the last four years we have grown our force of sales professionals that work closely with partners to sell to primary IT buyers, including Strategic IT Executives, Network Architects, IT Infrastructure Managers and Desktop 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 increase our revenue growth rate.

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 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 our current expectation for revenue growth, our income from operations and cash flows from operating and investing activities could be lower than in recent years.

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:

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, 2007, we completed six significant acquisitions, including the acquisition of XenSource, Inc. in 2007 and NetScaler, Inc. in 2005. 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 and core technologies, trademarks, patents and other intangibles. We periodically evaluate our intangible assets, including goodwill, for impairment at the reporting unit level (operating segment). As of December 31, 2007, we had $888.5 million of goodwill, of which approximately $43.7 million of goodwill was recorded in connection with our acquisitions of Reflectent Software, Inc., or Reflectent, and Orbital Data Corporation, or Orbital Data, in 2006 (we refer to these acquisitions as our 2006 Acquisitions), and $257.5 million of goodwill was recorded in connection with our acquisitions of XenSource and Ardence Delaware, Inc. or Ardence, in 2007 (we refer to these acquisitions as our 2007 Acquisitions). We review 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. 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 $490.7 million of goodwill and intangible assets in connection with our 2006 Acquisitions and our 2007 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 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, 2007, we had $276.3 million, net, of unamortized identified intangibles, which include core and product 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 and unspecified enhancements to our current and future product and service lines. Such changes could result in recognizing revenues over 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.

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, 2007, we derived approximately 44.5% 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:

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 weaker dollar in 2007, our operating expenses benefited from gains produced by our hedging programs as compared to 2006.

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.

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:

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 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 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:

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 officesbranding and marketing activities, which could increase our operating expenses. These efforts may not proportionally increase our operating revenues and could reduce our profits.

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 have begun a marketing initiative to reach these customers that includes extending our Advisor Rewards program to include a broader range of license types. In 2005, we also introduced a new product, Access Essentials^TM, specifically developed, packaged and priced to bring secure application virtualization and efficient centralized management of information resources to small and mid-sized businesses. 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. 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, many of which are sole-source suppliers. For example, all of the production, final test, warehousing and shipping for our Application Networking products,

including our NetScaler products, Access Gateway products and WANScaler 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 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:

There may be delay associated with establishing additional or replacement suppliers, particularly for components that are available only from sole or 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.

Our synthetic lease is an off-balance sheet arrangement that could negatively affect our financial condition and results.

In April 2002, we entered into a seven-year synthetic lease with a lessor for our headquarters office buildings in Fort Lauderdale, Florida. The synthetic lease qualifies for operating lease accounting treatment under SFAS No. 13,Accounting for Leases, so we do not include the property or the associated lease debt on our condensed consolidated balance sheets. However, if the lessor were to change its ownership of our property or significantly change its ownership of other properties that it currently holds, under FIN No. 46,Consolidation of Variable Interest Entities (revised) we could be required to consolidate the entity, the leased facility and the associated debt at that time.

If we elect not to purchase the property at the end of the lease term, we have guaranteed a minimum residual value of approximately $51.9 million to the lessor. Therefore, if the fair value of the property declines below $51.9 million, our residual value guarantee would require us to pay the difference to the lessor, which could have a material adverse effect on our results of operations and financial condition.

We have entered into a credit facility agreement that restrict our ability to conduct our business and failure to comply with such agreements 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 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. 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, 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.

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, in October 2005, Hurricane Wilma passed through southern Florida causing extensive damage to the region, including some minor damage to our corporate headquarters facility. 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.”

Matters relating to or arising out of our historical stock option granting practices, including regulatory inquiries or proceedings, litigation matters and potential additional cash and non-cash charges, could have a material adverse effect on us.

As described in the Explanatory Note to our Annual Report on Form 10-K for the year ended December 31, 2006, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 2 to our consolidated financial statements included therein, in the fourth quarter of 2006, the Audit Committee of our Board of Directors commenced a voluntary independent investigation of certain of our stock option granting practices and the related accounting during the period from January 1996 through December 2006. This investigation was conducted by the Audit Committee with the assistance of independent outside legal counsel and outside forensic accounting consultants. In addition to those grants evaluated as part of the Audit Committee’s investigation, we also evaluated all grants (consisting of two employee new hire grants) in December 1995, which was the month the Company completed its initial public offering, and all grants to non-employee directors. The Audit Committee completed its investigation in the second quarter of 2007. Based on the facts obtained in connection with the Audit Committee’s investigation and management’s supplemental review, we concluded that stock options granted during the period from December 1995 to March 2005, were accounted for using incorrect measurement dates, which required a restatement of our previously filed financial statements.

We incurred significant expenses related to legal, accounting, tax and other professional services in connection with the investigation of our historical stock option granting practices and the related restatements, and may incur significant expenses in the future with respect to such matters, including as a result of litigation matters or additional cash and non-cash charges. For example, as described in Part I, Item 3 “Legal Proceedings,” purported stockholder derivative actions have been filed relating to certain of our historical stock option grants. Even if resolved favorably, these matters may be time-consuming, expensive and disruptive to normal business operations, and the impact and outcomes of current or future litigation matters are difficult to predict and could have a material adverse effect on our business, results of operations and financial condition.

Additionally, as described in the Explanatory Note to our Annual Report on Form 10-K for the year ended December 31, 2006, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II Item 7 and in Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2006 in Part IV Item 15, after the Audit Committee completed its investigation of our historical stock option granting practices and our review of the accounting treatment for our historical stock option grants, we recorded additional stock-based compensation expenses and related tax effects with regard to certain past stock option grants, and we restated previously issued financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2006. Although we believe we made appropriate judgments in determining the financial and tax impacts of our historical stock option granting practices and have consulted with the Office of the Chief Accountant of the SEC on certain interpretive matters, we cannot provide assurance that regulatory authorities, including the Internal Revenue Service, or IRS, will agree with the manner in which we have accounted for and reported, or not reported, the financial and tax impacts. Specifically, in light of the significant judgment used in establishing revised measurement dates, alternate approaches to those used by us could have resulted in different compensation expense charges than those reported in our Annual Report on Form 10-K for the year ended December 31, 2006 and those differences could be considered material. We considered various alternative approaches and believe that the approaches used by us were appropriate under the circumstances. For a complete discussion of the judgments underlying the revised measurement dates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2006. If regulatory authorities disagree with our financial or tax adjustments and such disagreements result in material changes to our historical financial statements, we may be required to further restate our prior financial statements, amend prior filings with the SEC or take other action that is not currently contemplated. In addition, other adjustments for non-operating cash charges may be required in connection with the resolution of stock option related matters arising under any litigation commenced against us.

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, 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:

The stock market in general, The NASDAQ Global Select Market (formerly, the Nasdaq National Market), and the market for software companies and technology companies in particular, have experienced extreme price and volume fluctuations. 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 share-based compensation may have a material adverse impact on our reported results of operations.

Effective January 1, 2006, we adopted Statement of Financial Accounting Standards, or SFAS, No. 123R, Share-Based Payment, a complex accounting standard that requires companies to expense the fair value of employee stock options and similar awards. The application of SFAS No. 123R requires significant judgment and the use of estimates, particularly surrounding stock price volatility, option forfeiture rates and expected option lives, to build a model for appropriately valuing share-based compensation. There is a risk that, as a result of subsequent accounting guidelines or changes in our business, we could determine that the assumptions or model we used requires modification. Any such modification could result in significantly different charges in future periods and, potentially, could require us to correct the charges taken in prior periods. These modifications, as well as any such corrections of charges taken in a prior period could negatively affect our results of operations, stock price and our stock price volatility.

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 and our auction rate securities may experience an other-than-temporary decline in value, which would adversely affect our income.

In February 2008, approximately $45.5 million of our investment portfolio consists of 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. If the issuers of the affected securities are unable to successfully complete future auctions or refinance their obligations and their credit ratings deteriorate, we may be required to adjust the carrying value of these securities and recognize an impairment charge for an other-than-temporary decline in the fair values of these securities which will have an adverse impact on our results of operations. All of our auction rate securities, including those having recently experienced an auction failure, are currently rated triple-A by one or more rating agencies. We believe we will be able to liquidate our investment without significant loss within the next year, and we currently believe these securities are not significantly impaired. Based on our available cash and other investments, 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.

Our business and investments could be adversely impacted by unfavorable economic political and social conditions.

General economic and market conditions, and other factors outside our control including significant natural disasters, terrorist attacks or military actions, could adversely affect our business and impair the value of our investments. For example, an economic downturn could result in impairment in the value of our investments requiring us to record losses related to such investments. Impairment in the value of these investments may disrupt our ongoing business and distract management. As of December 31, 2007, we had $600.7 million of short and long-term investments, including restricted investments, with various issuers and financial institutions. In many cases we do not attempt to reduce or eliminate our market exposure on these investments and could incur losses related to the impairment of these investments. Fluctuations in economic and market conditions could adversely affect the value of our investments, and we could lose some of our investment portfolio. A total loss of an investment could adversely affect our results of operations and financial condition. For further information on these investments, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

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 2007 fiscal year that remain unresolved.

We lease and sublease a total of 1,131,695 square feet of office space in the United States, Canada and Latin America, which is comprised of 474,150 square feet related to our Americas segment, 187,127 square feet related to our Online Services division and 470,418 square feet relating to our corporate headquarters located in Fort Lauderdale, Florida. The Company’s corporate offices include leased and subleasedIncluded in this total square footage is 368,843 square feet of office space totaling approximately 461,000 square feet. In addition, the Company leases approximately 142,000in California, and 292,434 square feet of office space in other locations in the United States, Canada and Canada.Latin America.

The Company leasesWe lease and subleasessublease a total of approximately 240,000412,278 square feet of office space in various other facilities in Europe,outside of North and Latin America, the Asia-Pacific region,198,899 of which relates to our Europe, the Middle East and Africa.Africa, or EMEA, segment and 213,379 of which relates to our Asia-Pacific segment. In addition, the Company ownswe own land and buildings in the United Kingdom with approximately 48,00042,000 square feet of office space.

ITEM 3.    LEGAL PROCEEDINGSWe 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.

Due to the nature of our business, we are subject to patent infringement claims. In 2006, we were sued in the United States District Court for the Northern District of Ohio for alleged patent infringement by our Online Services division’s GoToMyPC service and in the United States District Court for the Southern District of Florida for alleged patent infringement by our Online Services division’s GoToMyPC and GoToMeeting services. The Companycomplaints name Citrix Systems, Inc. and Citrix Online LLC, a wholly-owned subsidiary of Citrix Systems, Inc., as defendants and seek unspecified damages and other relief. In January 2007, a similar suit naming Citrix Systems, Inc. was filed in the United States District Court of the Eastern District of Texas. In response, we filed answers denying infringement and alleging, among other things, that the asserted claims of these patents are invalid. With respect to the Northern District of Ohio case, on November 2, 2006, the court held a hearing for the purpose of construing disputed terms of the claims of the patent-in-suit, and on March 13, 2007, the court issued a claim construction ruling. On March 21, 2007, we moved for leave to amend our answer in that case to assert an affirmative defense and counterclaim of inequitable conduct, which is a complete defense. On August 28, 2007, the court granted our motion. On December 7, 2007, we filed motions for summary judgment in the Northern District of Ohio case, seeking judgment that the asserted patent is invalid and that we have not infringed the patent, as well as judgments on other, non-dispositive issues. On the same day, we filed a request with the United States Patent and Trademark Office seeking inter partes reexamination of the patent in suit, and we subsequently filed a request with the court in the Northern District of Ohio seeking a stay of the litigation pending the Patent Office’s determination of our reexamination request. The court has all of these motions under advisement. The Patent Office has not yet ruled on our reexamination request. Trial in the Northern District of Ohio case currently is scheduled to begin March 24, 2008. Trial in the Southern District of Florida case currently is scheduled to begin April 28, 2008, and trial in the Eastern District of Texas case currently is scheduled to begin June 15, 2009. In addition, the United States Patent and Trademark Office has decided to reexamine the patent at issue in the Southern District of Florida case. We believe that we have meritorious defenses to the allegations made in each of the complaints and intend to vigorously defend these lawsuits; however, we are unable to currently determine the ultimate outcome of these matters or the potential exposure to loss, if any.

On March 6, 2007, a purported stockholder derivative action entitled Sheet Metal Workers Local 28 Pension Fund v. Roger W. Roberts et al. (C.A. No. 07-60316), was filed in the US District Court for the Southern District of Florida against certain of our current and former directors and officers, and against us as a nominal defendant. The lawsuit asserts, among other things, that certain stock option grants made by us were dated and accounted for inappropriately. The lawsuit seeks the recovery of monetary damages and other relief for damage allegedly caused to us. An amended complaint, which changed the plaintiff in the action, named additional defendants and included additional allegations concerning our stock option granting practices, was filed on January 15, 2008 under the caption Rappaport v. Roberts, et al. (CA No. 07-60316).

We also received a demand letter dated March 15, 2007 from a purported stockholder with respect to certain stock option grants made to our current and former directors and officers during the years 1996 through 2003. That demand letter asserted, among other things, that certain stock option grants made by us were dated and accounted for inappropriately. The demand letter sought, among other things, the commencement by our Board of Directors of an action against our directors and officers from 1996 forward for alleged breaches of fiduciary duties in connection with the granting of the options. A special committee of independent directors was appointed to review and consider the assertions contained in the demand letter. The special committee has completed its work and has determined that it would not be in the best interests of the company to pursue the claims referred to in the demand letter.

In July 2007, two additional purported stockholder derivative actions entitled Ekas v. Citrix, et al. (Case No. 07-16114-11) and Crouse v. Citrix, et al. (Case No. 07-16249-03) were filed in the Circuit Court for Broward County, Florida state court against certain of our current and former directors and officers, and against us as a nominal defendant. These actions assert, among other things, that certain stock option grants made by us were dated and accounted for inappropriately. As with the Sheet Metal Workers’ action, both the Ekas and Crouse actions seek the recovery of monetary damages and other relief for damages allegedly

caused to us. Neither the purported stockholder derivative actions nor the demand letter described above seeks to recover amounts from us. An amended complaint in the Ekas action, which contains additional allegations concerning our stock option granting practices was filed on December 14, 2007.

During the course of our stock option investigation, we have periodically met and discussed the results of this investigation with the staff of the Securities and Exchange Commission, or SEC. On January 30, 2008, we received a letter from the SEC Staff stating that the Staff has completed its investigation and does not intend to recommend any enforcement action by the SEC against us.

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, management believes, based on discussions with counsel,we believe that the ultimate outcome will not materially affect the Company’sour business, financial position, results of operations or cash flows.

ITEM 4.

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

At the Company’s annual meeting of stockholders held on October 18, 2007, the Company’s stockholders took the following actions:

The Company’s stockholders elected Mark B. Templeton, Stephen M. Dow and Godfrey R. Sullivan, each as a Class III director, to serve for a three-year term expiring at the Company’s annual meeting of stockholders in 2010 or until his successor has been duly elected and qualified or until his earlier resignation or removal. The directors were elected by a plurality of the votes cast at the 2007 annual meeting as follows: 144,751,442 shares voted for the election of Mr. Templeton, 82,306,008 shares voted for the election of Mr. Dow and 100,138,443 shares voted for the election of Mr. Sullivan; and 5,572,519 shares were withheld from the election of Mr. Templeton, 68,017,953 shares were withheld from the election of Mr. Dow and 50,185,518 shares were withheld from the election of Mr. Sullivan. No other persons were nominated, nor received votes, for election as a director of the Company at the 2007 annual meeting. The other directors of the Company whose terms continued after the 2007 annual meeting were Murray J. Demo, Asiff S. Hirji, Thomas F. Bogan and Gary E. Morin.

None.The Company’s stockholders approved an amendment to the Company’s 2005 Equity Incentive Plan. The votes cast at the 2007 annual meeting were as follows: 106,272,831 shares voted for, 22,652,032 shares voted against and 1,824,402 shares abstained from voting. There were 19,574,696 broker non-votes with respect to this proposal.

The Company’s stockholders approved the stockholder proposal regarding the adoption of a majority voting standard for uncontested elections. The votes cast at the 2007 annual meeting were as follows: 91,375,597 shares voted for, 38,106,930 shares voted against and 1,266,737 shares abstained from voting. On December 6, 2007, we amended our by-laws and Corporate Governance Guidelines to implement a majority voting standard for uncontested director elections. There were 19,574,697 broker non-votes with respect to this proposal.

PART II

Price Range of Common Stock and Dividend Policy

The Company’sOur common stock is currently traded on The Nasdaq NationalGlobal Select Market under the symbol “CTXS.” The following table sets forth the high and low closing prices for the Company’sour common stock as reported on The Nasdaq NationalGlobal Select Market for the periods indicated, as adjusted to the nearest cent. Such information reflects inter-dealer prices, without retail markup, markdown or commission and may not represent actual transactions.

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 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 selllicense most of our MetaFrame Access Suite products bundled with an initial subscriptiona one year contract for software license updates that provide the end-user with free 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 release or purchase, technical support, product training or consulting services. We allocate revenue to software 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 allocated to the delivered software product using the residual method and recognized at the outset of the arrangement using the residual method as the softwareproduct licenses are delivered. If we cannot objectively determine the fair value of each undelivered element based on the VSOE 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 or applicable renewal rates for software license updates.

In the normal course of business, we doare not permitobligated to accept product returns from our distributors under any other conditions, unless the product item is defective in manufacture, but we do provide most of our distributors and value added resellers 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 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 $2.3$1.7 million at December 31, 20042007 and $3.0 million at December 31, 2003. The decrease in allowances for estimated product returns is a reflection of the decrease in stock rotation experience primarily due to a reduction in packaged product inventory held by our distributors resulting from an increase in enterprise customer license arrangements, which are typically delivered electronically.2006. 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, 2004 or2007 and December 31, 2003.2006. We also record reductions to revenue for customer programs and incentive offerings including volume-based incentives, at the time the sale is recorded. If market conditions were to decline, 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, the effective date for such adoption. Prior to January 1, 2006, we accounted for our stock-based compensation plans under the recognition and measurement provisions of Accounting Principles Board (“APB”) Opinion No. 25,Accounting for Stock Issued to Employees, and related Interpretations, as permitted by SFAS No. 123,Accounting for Stock-Based Compensation. We did not recognize compensation cost related to stock options granted to our employees and non-employee directors that had an exercise price equal to or above the market value of the underlying common stock on the date of grant in our consolidated statement of income prior to January 1, 2006. We elected to adopt SFAS No. 123R using the modified-prospective method, under which compensation cost, based on the requirements of SFAS No. 123R, is recognized beginning with the effective date for all stock-based awards granted to employees after the effective date and prior to the effective date that remain unvested as of the effective date. In addition, under the modified-prospective method prior periods are not revised for comparative purposes. 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 considered 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, 2007, there was $217.7 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 2.38 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 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. The guidance in SFAS No. 123R and SAB No. 107 is relatively new from an application perspective and the application of these principles may be subject to further interpretation and refinement over time. See Notes 2 and 6 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007 for further information regarding our adoption of SFAS No. 123R.

Core and Product Technology Assets.Assets

We have acquired our core and product 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 core and product technology assets acquired based on their estimated fair values. We typically engage third party appraisal firms to assist us in determining the fair values of core and product technology assets acquired. Such valuations 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 of the core and product technology assets include but are not limited to future expected cash flows earned from the core and product 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 core and product technology assets for impairment on a periodic basis by comparing the estimated net realizable value to the unamortized cost of the technology. We have acquired our core and product technology assets primarily from our Net6, Expertcity and Sequoia acquisitions as well as under other third party agreements. The core and product technology assets acquired in our Net6 acquisition will extend our ability to provide easy and secure access through our MetaFrame Access Suite of products. The core and product technology assets acquired in our Expertcity acquisition form the basis of our Citrix Online division and the assets acquired in our Sequoia acquisition, as well as under other third party agreements, form the basis for our MetaFrame Secure Access Manager product. The recoverability of these technologies is primarily dependent upon our ability to commercialize products utilizing these products.technologies. The estimated net realizable value of the purchased Sequoia and other technology is based on the estimated undiscounted future cash flows associated with our MetaFrame Secure Access Manager. The estimated net realizable value of the purchased Expertcity technology is based on the estimated undiscounted future cash flows associated with our Citrix Online services. Our revenues are forecasted based on historical sales, data receivedderived from rate projections on our subscribing customer base and estimates from our sales channels and end-customer sales force.such technology. Our assumptions about future revenues and expenses require significant judgment associated with the forecast of MetaFrame Secure Access Manager andthe performance of our Citrix Online products. Actual revenues and costs could vary significantly from these forecasted amounts. As of December 31, 2004,2007, the estimated undiscounted future cash flows expected from core and product 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 thisthe technology, we could determine that some or all of their remaining $36.3$177.3 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.

On December 8, 2004, we acquired Net6, which resulted in additional core and product technology of $13.3 million, net of amortization, at December 31, 2004. For more information concerning our acquisition of Net6, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Acquisitions.”

Goodwill.Goodwill

At December 31, 2004,2007, we had $361.5$888.5 million in goodwill primarily related to our acquisitions of Net6, Expertcity and Sequoia.acquisitions. The goodwill recorded in relation to these acquisitions is not deductible for tax purposes. We operate in a single marketindustry segment consisting of the design,

development and marketing and support of access infrastructure software, hardware and services for enterprise applications.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, Europe, the Middle East and Africa, or EMEA, and Asia-Pacific regions and from online services sold by our Citrix Online Services division. These three geographic regions and the Citrix Online Services division constitute our reportable segments. See noteNote 12 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007 for additional information regarding our reportable segments. We evaluate goodwill along these segments, which represent our reporting units. Substantially all of our goodwill at December 31, 20042007 was associated with our Americas and Citrix Online Services division reportable segments.

On January 1, 2002, we adopted Statement of Financial Accounting Standard or SFAS No. 142,Goodwill and Other Intangible Assets. As a result of adopting SFAS No. 142, our goodwill is no longer amortized but is subject to an annual impairment test. In accordance with SFAS No. 142, we ceased amortizing goodwill with a net book value at January 1, 2002 of $152.4 million, including $10.1 million of acquired workforce previously classified as purchased intangible assets. 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 at the dateas of adoption and annually as required.December 31, 2007. There were no impairment charges recorded as a result of the adoption of SFAS No. 142 orour annual impairment tests. Due to uncertain market conditions and potential changes in our strategy, and 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.

Current and Deferred Tax Assets.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, 2004, the Company has $40.82007, we had approximately $43.0 million in net 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 not more likely than not that some portion or all of the deferred tax assets will not be realized. Management reviewsWe review deferred tax assets periodically for recoverability and makesmake 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, 2004,2007, we determined that ano valuation allowance of approximately $1.3 million relating to foreign tax credit carryovers was necessary to reduce our deferred tax assets to the amount that will more likely than not be realized. 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.

Stock-based Compensation Disclosures

Our stock option program is a broad based, long-term retention program that is intended to attract and reward talented employees and align stockholder and employee interests. The number and frequency of stock option grants are based on competitive practices, our operating results, the number of options available for grant under our shareholder approved plans, and other factors. All employees are eligible to participate in the stock option program.

As of December 31, 2004, we had six stock-based compensation plans, including plans assumed in acquisitions. We typically grant stock options for a fixed number of shares to employees with an exercise price equal to or above the market value of the shares at the date of grant. As discussed in note 2 to our consolidated financial statements, we apply the intrinsic value method under Accounting Principles Board or APB Opinion No. 25,Accounting for Stock Issued to Employees, and related interpretations in accounting for our plans except for 51,546 options assumed as part of the Net6 acquisition, which were accounted for in with FASB Interpretation No. 44,Accounting for Certain Transactions Involving Stock Compensation (an Interpretation of APB Opinion No. 25)because they had an exercise price below market value. No stock-based compensation cost has been reflected in net income except for the amounts related to the 51,546 options assumed as part of the Net6 acquisition. The impact of our fixed stock plans and our stock purchase plan on our consolidated financial statements from the use of options is reflected in the calculation of earnings per share in the form of dilution.

The following table (in thousands, except option price) provides information as of December 31, 2004 about the securities authorized for issuance to our employees and directors under our fixed stock compensation plans, consisting of our Amended and Restated 1995 Stock Plan, the Third Amended and Restated 1995 Employee Stock Purchase Plan, the Amended and Restated 1995 Non-Employee Director Option Plan and the Second Amended and Restated 2000 Director and Officer Stock Option and Incentive Plan:

The following table provides information about stock options granted in 2004 and 2003 for employees, non-employee directors and for certain executive officers. The stock option data for listed officers relates to our Named Executive Officers. The “Named Executive Officers” for the year ended December 31, 2004, consist of our chief executive officer and the four other most highly compensated executive officers who earned total annual salary and bonus in excess of $100,000 in 2004. For further information on 2004 Named Executive Officers, see our 2004 proxy statement that will be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, 2004. For 2003, the “Named Executive Officers” consist of our chief executive officer and the four other most highly compensated executive officers and one other individual that would have qualified, except that she was not an executive officer at December 2003 that earned total annual salary and bonus in excess of $100,000 in 2003. The 2003 Named Executive Officers are identified in our 2003 Proxy Statement dated April 4, 2004. Named Executive officers for both years presented were employees as of the respective year end.

		Year ended December 31,
		2004			2003
Net grants to all employees, non-employee directors and executive officers as a percent of outstanding shares(1)(2)		1.73	%		1.03	%
Grants to Named Executive Officers as a percent of outstanding shares(2)		0.17	%		0.24	%
Grants to Named Executive Officers as a percent of total options granted		4.83	%		6.89	%
Cumulative options held by Named Executive Officers as a percent of total options outstanding(3)		9.66	%		10.08	%

The following table presents our option activity from December 31, 2002 through December 31, 2004 (in thousands, except weighted-average exercise price). Some amounts may not add due to rounding.

A summary of our in-the-money and out-of-the-money option information as of December 31, 2004 is as follows (in thousands, except weighted average exercise price). Out-of-the-money options are those options with an exercise price equal to or above the closing price of $24.46 per share for our common stock at December 31, 2004.

The following table provides information with regard to our stock option grants during 2004 to the 2004 Named Executive Officers: