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Taleo Expands In Europe

Posted on Monday, Aug 22nd 2011

Over the past two years, there has been tremendous M&A activity in the talent management sector as companies like SuccessFactors (NASDAQ:SFSF) and Taleo (NASDAQ:TLEO) look to provide end-to-end talent management solutions and fill the gaps in their portfolio. Taleo in the last quarter announced its plans to acquire European vendor Jobpartners for $38 million. Let’s take a closer look.


The recent acquisition of Jobpartners makes Taleo, with annual revenue of $237.3 million, one of the largest SaaS-based talent management vendors in Europe. Last year in October, SuccessFactors, with annual revenue of$209.4 million, announced its acquisition of YouCalc, a SaaS analytics company, giving it a push into real-time analytics and also a presence in Europe.

Taleo’s Financials
Taleo recently reported second quarter revenue of $69.7 million, up 24% y-o-y. Net loss was $8.8 million or $0.20 per share compared to net loss of $1.4 million or $0.04 per share last year. Non-GAAP net income was $0.27 per share compared to non-GAAP net income of $0.14 per share last year. Analysts expected earnings of $021 per share on revenue of 76.1 million.

Subscription revenue for the second quarter was $55.2 million, an increase of 15% y-o-y. Subscription revenue fell by a $6.5 million reserve for the settlement of claims asserted by the United States government. The claims related to a subcontract entered into in 2002 through which services were provided to the Transportation Security Administration (“TSA Settlement”). Professional services revenue for the second quarter was $14.5 million, an increase of 74% y-o-y. Deferred revenue was up 15.6% to $92.2 million.

Taleo signed 275 new customers in the quarter and closed seven new large enterprise deals with first-year contract values in excess of $250,000. Cash generated from operations for the first half of 2011 was $19.4 million compared to $21.3 million in the first half of 2010. The company ended the quarter with total cash of $148.4 million, a decrease of $96.5 million from the prior year mainly because of the acquisitions of Learn.com and Cytiva, a mid-market provider of on-demand recruiting software solutions.

Taleo is trading around $22.77, close to its 52-week low of $22.04. Its 52-week high is $38.28 and it has a market cap of about $940 million.

Chart forTaleo Corp. (TLEO)

SuccessFactors’ Financials
Competitor SuccessFactors recently reported second quarter non-GAAP revenue of $73.2 million, up 48% y-o-y and 8% q-o-q. GAAP net loss was $0.09 per share and non GAAP net income was $0.03 per share compared with $0.01 per share last year. Analysts expected breakeven earnings on revenue of $69.6 million. SuccessFactors generated $8.2 million from operating activities, up from $6.8 million last year. Deferred revenue was $241.7 million, up 28% y-o-y.

For the third quarter, SuccessFactors expects to break even on non-GAAP revenues of $83 million to $84 million. For the full year, the company expects to break even on non-GAAP revenue of $310 million to $315 million. Last quarter, it forecast full-year revenues of $275 million to $280 million. SuccessFactors is trading around $20.6, close to its 52-week low of $19.12. Its 52-week high is $40.44 and it has a market cap of about $1.7 billion.

Chart forSuccessFactors, Inc. (SFSF)
Sayantani Ghosh on Reuters reports that job volatility rather than actual job numbers is the primary driver of business for talent management software makers like Taleo and SuccessFactors. The talent management market, currently worth about $3 billion, is expected to grow 12% to 15% this year. There is bound to be more consolidation in this highly fragmented market as the leading players compete for larger share, as well as continue to fill out their functionality.

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