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Salesforce.com Kicks Off Acquisition Spree

Posted on Monday, May 31st 2010

In my most recent post on Salesforce.com (NYSE:CRM) and RightNow (NASDAQ:RNOW), I observed how all the major SaaS companies were growing to become consolidators. It was high time for Salesorce.com, the big daddy of SaaS, to start consolidating. Early this month, Salesforce.com, with annual revenue of $1.3 billion, made its move with the acquisition of Jigsaw, a crowd-sourced contact data provider. Let’s take a closer look.

Curt Hopkins at ReadWriteWeb says the $142 million deal makes sense as both Salesforce.com and Jigsaw deliver information using a cloud computing model. Jigsaw has more than 1.2 million users, has a contact database of over 21 million professionals at four million companies, and serves 800 corporate customers. I agree with Curt. Jigsaw is a natural first acquisition for Salesforce.com.

Michael Arrington at TechCrunch reviewed Jigsaw’s business model in 2006 and again last year. In 2006, Jigsaw paid users to upload other people’s contact information. Firms then bought the contact information from Jigsaw. The company has since then changed its model: Users now receive points for uploading contacts that can be used for buying contact information at the site. Also, people can check if their personal information has been uploaded and can get it removed, at least temporarily. Jigsaw’s revenue was about $30 million in 2009.

Expanding on its lead generation theme, Salesforce.com’s next acquisition ought to be InsideView. We’ve covered the company in great detail so far through the Deal Radar series and interview with its CEO. According to Paul Boutin on VentureBeat, InsideView recently raised $11.5 million second round of funding.

Meanwhile, Microsoft has sued Salesforce.com for infringing on nine of its patents covering a variety of back-end and user interface features including mapping data and displaying menus on Internet pages. Salesforce.com says the lawsuit could hurt its profit for one quarter but doesn’t believe that its overall financial health will suffer. Salesforce.com recently reported first quarter revenue of $377 million, up 24% and EPS of $0.13, down 13%. It added 4,800 customers in the quarter to a total of 77,300 and ended the quarter with $1.9 billion in cash. Q4 coverage is available here.

For the second quarter, Salesorce.com expects EPS of $0.07 to $0.08 on revenue of $381 million to $383 million. It raised its fiscal 2011 revenue outlook to $1.545 billion to $1.555 billion. The stock is currently trading around $86.53 with market cap of about $11 billion. It hit a 52-week high of $89.5 on April 26.

Chart forSalesforce.com (CRM)

On the other hand, RightNow with annual revenue of $152.7 million, acquired social networking company HiveLive for $5.9 million back in September and started rolling out a software program, Social Solution, to monitor discussion boards. Since then, RightNow has made several enhancements to its Social Solution offering, including socializing the RightNow knowledge base to allow consumers to assist in knowledge creation and maintenance. It recently introduced RightNow Mobile, which enables organizations to extend customer support via any mobile device.

In April, RightNow reported first quarter revenue of $42.1 million, up 17%. Net income was $0.585 million or $0.02 per share versus $1.3 million or $0.04 per share last year. RightNow signed 46 new customers in the quarter. The company ended the quarter with $98 million in cash. Q4 coverage is available here.

For the second quarter, revenue is expected to be $42.5 million to $43.5 million and EPS $0.02 to $0.04. For the full year 2010, RightNow expects revenue of $175 million to $180 million. The stock is currently trading around $14.55 with market cap of $465.42 million. It hit a 52-week high of $19.39 on April 12.

Chart forRightnow Technologies Inc. (RNOW)

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