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Citrix GoTo Merger with LogMeIn Shakes Up Telephony Market

• By Kurt Mackie
• August 04, 2016

In a deal worth an estimated $1.8 billion, Citrix's GoTo products will merge with LogMeIn, forming a new business entity that promises to change the face of the business collaboration market.

Announced last week, the deal is poised to create one of the biggest Software as a Service (SaaS) companies in the industry. The deal is a merger that's based on a Reverse Morris Trust transaction. Under the terms, Citrix is spinning off its GoTo online meetings service to form a new company with LogMeIn. Citrix's shareholders get a slight majority stake in the deal.

The two companies aren't in altogether overlapping markets. LogMeIn is known for its remote service tools used by IT pros, while Citrix is known for its virtualization products. However, the GoTo spin-off products are similar to LogMeIn's products.

LogMeIn's main products include Pro (a remote access solution), Central (an IT management tool), Rescue (for remote client support) and LastPass (a password management solution). Citrix, a steadfast Microsoft partner, makes XenApp and XenDesktop virtual desktop infrastructure solutions for Windows apps, XenMobile for mobile device management, ShareFile for file sync services and NetScaler for network infrastructure support, among other products, but its GoTo product is the one being spun off.

Citrix had announced plans to spin off GoTo about eight months ago. Its GoTo online meetings solution was generating revenue, but wasn't considered to be strategic with Citrix's virtualization products, and was even getting some competition from LogMeIn, according to a report by 451 Research.

"Despite generating $629m in revenue last year, GoTo was ultimately deemed a distraction to adequately exploiting new revenue gain and share across Citrix's strategic virtualization, networking and app delivery products," 451 Research's report explained.

In a conference call, Bill Wagner, LogMeIn's president and CEO, told financial analysts that the two companies' products "overlap around meetings" but are "built for different use cases." He explained that LogMeIn's Join.me service is designed to support "ad hoc meetings and collaborations" while "GoToMeeting is really a professional meeting platform with a broad feature set that includes conference calling, webinars and training capabilities," according to a transcript of the call (PDF). Wagner implied that LogMeIn's solutions would target the collaboration market while GoToMeeting's solutions would compete in the online business meetings space. Some consolidation and cuts, though, seemed to be implied with the merger announcement.

The merger will combine the two companies' capabilities to address their current combined "2 million customers," Wagner said.

"I expect all of our users to benefit from these innovations, whether we are talking about some of our larger customers like Microsoft and HP, who use our software to support millions of their customers, small and medium businesses who rely on our products to increase productivity of their employees, or our nearly 8 million free users who rely on our products to make their life easier every day," he added.

The new company will pursue emerging markets in "cloud-based telephony, identity, as well as IoT [Internet of Things]," according to a press release by the companies. Rob Bradley, LogMeIn's vice president of investor relations, indicated during the conference call with analysts that the combined company would obtain "a meaningful foothold in cloud-based telephony with GoTo's great Grasshopper business, which they acquired last year." Grasshopper is a cloud-based service that provides management over cell phone numbers for business purposes.

The newly merged company will face traditional SaaS vendor competition from Microsoft and Cisco, according to the 451 Research's analysis. There also will be collaboration tools competition with Bomgar. Work in the collaboration, identity and access management, and cloud-based telephony areas could spur new competition as well. For instance, there's potential competition with Tropo, Twilio, Atlassian, Facebook, Line, Octa and Ping Identity, according to 451 Research.

The deal was unanimously approved by Citrix and LogMeIn's boards, but it still awaits regulatory approvals. It's expected to close in Q1 2017. Wagner will be the president and CEO of the new company, yet unnamed, which will be based in Boston.