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CRM And RNOW Hook Onto Social Networking

Posted on Friday, Nov 27th 2009

According to Gartner, worldwide CRM market revenue was up 12.5% to $9.15 billion in 2008, and Salesforce.com continues to rise rapidly with a 10.6% share. The company recently announced its social networking product Chatter, which was inspired by Facebook and Twitter. While Chatter has been developed in-house, rival SaaS customer relationship management (CRM) vendor RightNow is entering the social networking space via acquisitions. Let’s take a closer look at their performances.

On September 16, RightNow completed its $5.9 million acquisition of social networking company, HiveLive. RightNow believes that by adding the HiveLive platform, it will deliver the broadest social CRM solution in the marketplace and meet customer experience needs of consumer-focused organization. Read my interview with CEO Greg Gianforte, available here.

Salesforce plans to begin selling Chatter in February. Chatter will work with Salesforce’s core CRM software to track leads and deals and will be used to display “profiles” of employees and posts about projects they’re working on.

On November 17, Salesforce.com (NYSE:CRM) reported Q3 revenue of $331 million, up 20% y-o-y. Profit doubled to $20.6 million or $0.16 per share from $10.12 million or $0.08 per share last year. Analysts expected earnings of $0.16 per share on revenue of $324million. Q2 analysis is available here.

Gross margin improved 60 basis points to 81.2% as a result of a mix shift between revenue lines. Salesforce.com added 160 people in sales and the headcount increased to 3800. Cash from operations was up 107% to $36 million and it ended the quarter with cash of $1.07 billion, up by $265 million from last year.

Deferred revenue grew 16% to $545 million. International revenue accounted for approximately 30% of revenue. Revenue from America was up 16% to $233.0 million, Europe grew 26% to $61.0 million and Asia grew 31% to $37.0 million.

Subscription and support revenues increased 21% to $306.9 million while Professional services and other revenues were up 3% to $23.7 million. Salesforce.com added another 4,700 customers this quarter to take its customer count to 67,900, up 31% over last year. Although the company’s attrition rate continued to remain in the high teens, it declined slightly for the first time in several quarters.

Salesforce.com says that against Oracle, it won deals at ING, American Express, Centex, PR Newswire, and Phonographic Performance. Against Microsoft, it won deals at MCSI, Needham & Co., Denmat, and Vital Images. It also has a long list of wins against SAP.

For the fourth quarter, Salesforce.com expects revenue in the range of $340 million to $342 million and EPS in the range of $0.14 to $0.15. The company raised its full-year guidance: it now expects revenue in the range of $1.292 billion to $1.294 billion and EPS in the range of $0.62 to $0.63. The stock is currently trading around $65 with market cap of about $8 billion. It hit a 52-week high of $66.15 on November 13.

Chart for Salesforce.com (CRM)

On October 22, RightNow Technologies (NASDAQ:RNOW), a SaaS CRM vendor withannual revenue of $140.4 million, reported a strong third quarter. It signed seven deals over a million dollars and signed its first deal for its new social offering.

Q3 revenue was $38.7 million, compared to $36.2 million last year. Net income was $2 million or $0.06 per share, compared to a net loss of $1.4 million, or $0.04 per share last year. Non-GAAP profit was $3.8 million, or $0.12 per share. Analysts estimated earnings of $0.01 per share. Q2 analysis is available here.

Recurring revenue was up 15% to $29.7 million. Gross margin improved to 71% over 70% in Q2 and 64% last year. Headcount was 792, up 5% from 756 in Q2 with the company’s recent acquisition accounting for half this growth. RightNow generated cash from operations of $4.9 million and ended the quarter with total cash of $32.4 million.

Professional services revenue was $8.97 million, down from $10.28 million last year.
The mix of revenue across geographies was 72% from the Americas, 19% from EMEA, and 9% from Asia-Pacific.

During the quarter, RightNow signed 56 new customers. The average first-year contract value increased to about $112,000. The company had seven deals of over $1 million, 83 deals between $100,000 and $1 million, and 388 deals of less than $100,000. Average deal term was 20 months. Bookings for the quarter were $51.7 million. RightNow says it is consistently winning deals against salesforce.com, SAP, Oracle, and the niche e-service players.

Steve Singh, the chairman and CEO of Concur, joined its board in October. My interview with Singh is available here.

Based on its performance, RightNow expects fourth quarter revenue in the range of $39 to $40 million and EPS in the range of negative $0.01 to positive $0.01. Non-GAAP EPS is expected to in the range of $0.04 to $0.06. Analysts expect earnings of $0.01 per share.

For the full year 2009, RightNow expects revenue in the range of $150 million to $151 million, GAAP EPS of $0.09 to $0.11 and non GAAP EPS of $0.33 to $0.35. The stock is currently trading around $15 with market cap of about $475 million. It hit a 52-week high of $15.10 on October 12.

Chart for Rightnow Technologies Inc. (RNOW)

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