Following Taleo’s acquisition of Vurv, Netsuite followed with the consolidation trend in the SaaS sector (and in its majority shareholder Larry Ellison’s footsteps). On June 2, it announced its plans to acquire OpenAir, a leader in on-demand project management software, for $26 million.
NetSuite plans to integrate OpenAir with its SaaS ERP suite using Web services by the end of the year and also expects its 2008 losses to increase as a result. OpenAir’s competitors include Daptiv, which we covered recently in the Deal Radar 2008 series.
Netsuite’s shares have tumbled down to around $20 with a market cap of $1.25 billion. NetSuite went public in December last year with an opening price of $26 that shot up to $45.98 in two days. Earlier coverage is available here and here.
For Q2, it expects loss of $0.01 to $0.02 per share and revenue between $36 and $36.7 million. Analysts estimate loss of $0.01 per share on sales of $36.7 million.
For 2008, NetSuite now expects loss of $0.04 to $0.06 per share on revenue of $156 to $159 million. Earlier outlook was for loss of $0.04 per share with revenue between $154 and $157 million. Analysts estimate loss of $0.01 per share on sales of $156.2 million.
NetSuite reported its Q1 results on May 1. Total revenue for the quarter was $34.1 million, a 47% increase over the first quarter of 2007 and an 8% increase over the fourth quarter of 2007. Non-GAAP net loss for quarter was $420,000 or $0.01 per share versus $842,000 or $0.01 per share in the prior quarter and $2.3 million or $0.04 per share in Q1 2007. GAAP net loss was $2 million ($0.03 loss per share) versus $9.3 million or $1.24 loss per share in Q1 2007 and $3.3 million or $0.22 per share in Q4.
Deferred revenue at the end of the quarter was $68.6 million, excluding about $7.4 million of deferred revenue related to the TCI and MJS reseller agreements. It added more than 400 customers in the quarter, down from 430 in Q1. Its subscription revenue renewal was more than 90% of the subscription revenue sold in Q1 2007. Its international revenue grew 64% y-o-y to $6.4 million or 19% of its total revenue.
While NetSuite is a relatively new kid on the block, Salesforce.com, founded in 1999, is completing a decade this year and is also set to cross $1 billion in revenue. Apart from being the leading SaaS vendor, it also lists among the Aberdeen Group’s top 10 most influential technology vendors. Earlier coverage is available here, here, and here.
On May 21, Salesforce.com (NYSE: CRM) reported its first quarter results that beat analyst estimates. Revenue was up 52% y-o-y and 14% q-o-q to $248 Million. Net income was $9.56 million or $0.08 EPS, up from $730,000 or $0.01 EPS last year. Analysts estimated EPS of $0.07 on revenue of $236 million.
About 91% of its revenue comes from subscription and support revenues and this amounted to $225.3 million in the quarter, up 53% y-o-y and 15% q-o-q. Professional services and other revenues were $22.3 million, up 51% y-o-y and 9% q-o-q. In terms of enterprise size, revenue mix is one-third small enterprises, one-third medium, and one-third large enterprises.
Salesforce.com added 2600 customers in the quarter to take its customer base to 43,600, up 11,300 y-o-y. Its churn is less than 1% each month. Its gross margin improved 3 points y-o-y to 79%, driven by gross margin improvement in professional services business. Deferred revenue was approximately $470 million, up 59% y-o-y and down 2% q-o-q.
Salesforce is also doing well internationally. Its international revenues accounted for 28%, up from 23% last year. Americas revenue was up 43% to $178 million, Europe was up 76% to $45 million and Asia Pacific revenue doubled to $24 million.
Based on its performance, CRM raised its full year guidance to $1.060 – $1.065 billion from $1.030 – $1.035 billion. EPS guidance also increased to range between $0.33 and $0.34. For the second quarter, it expects revenue between $258 and $259 million. GAAP diluted EPS is expected to be between $0.07 and $0.08. Analysts are expecting EPS of $0.08 on revenue of $251 million.
Its stock is currently trading around $71 with a market cap of around $8.5 billion. It hit a 52-week high of $74.70 on May 30. Following its deal with Google to integrate Google Apps into its CRM applications, its stock picked up on an analyst report suggesting that Google should acquire it which also set the blogosphere buzzing.
My hypothesis is that Salesforce.com should, itself be the consolidator of SaaS companies, rather than getting bought by Google. I don’t, at all, like the concentration of power in Google’s hands if the jewel of SaaS lands also in their proverbial lap.