With its second-quarter figures due on 17 July, Citrix is pre-empting the results by announcing that it expects to lay off around 10 per cent of its staff.

This time last year, Citrix earned revenues of $147m for the second quarter. The expectation for 2002 is somewhere between $116m and $118m.

Profits will dip from 12 cents per share to somewhere between five and six cents. This may be adjusted to exclude amortisation charges and write-offs, giving earnings of between six and seven cents per share.

The company is not seeing this as a temporary blip. The estimate for third-quarter revenues is set at $110m to $115m, and the full-year figures are expected to come in at around $490m.

It is not surprising, therefore, that it has felt the need to take quick action.

The immediate consequence of the reduced profitability is that the firm's worldwide headcount will be reduced by 10 per cent. It is believed that the current staffing levels are just below 2,000, so we can expect to see 200 job losses.

In addition to this, there will be a significant reduction in sales and marketing expenses, and more focus on direct sales, so it shouldn't be too difficult to work out where the layoffs will occur.

The interesting part of the announcement is president and chief executive Mark Templeton's analysis of where things might be going wrong.

The indications are that revenues from electronic licences and software subscriptions are increasing by 15 per cent. The problem seems to lie in the acquisition of new small customers.

This is an area where Citrix has traditionally done reasonably well as small businesses look to MetaFrame as a solution to their terminal server requirements.

In times of hardship, it seems, they turn to the free option from Microsoft. The software giant's Terminal Server is another of those bundled layers that offers the connectivity options that these small businesses need but without some of the added value that Citrix usually looks to provide.

Templeton expects that these companies will eventually turn to Citrix once they realise that they need that extra value. This has the effect of lengthening the sales cycle for Citrix in a shrink-wrap market that usually has no sales cycle at all.

Does this mean that one or two quarters down the road, we should see those revenue levels picking up again as Microsoft Terminal Server users move across to MetaFrame?

Clearly the next-quarter prediction doesn't assume so. The problem may be a long-term issue and perhaps Citrix needs to do something to maintain the attention of that audience. Shame about those marketing staff.