Oracle recently acquired its first SaaS company, RightNow, for $1.5 billion. RightNow had annual revenue of $185.5 million in 2010, and its acquisition makes Oracle a direct competitor of Salesforce.com. Meanwhile, Salesforce, the leader of the SaaS CRM market, continued to develop its social networking capabilities with its recent acquisitions of social customer service startup Assistly for $50 million and Model Metrics, a mobile and social cloud computing consulting services company for an undisclosed amount. Let’s take a closer look.
“The RightNow deal coupled with the purchase of Endeca illustrates how Oracle at first pooh-poohs big trends—unstructured data, NoSQL and cloud computing—but then hops on the bandwagon via acquisition. In other words, Oracle will collect the maintenance, but isn’t going to let rivals like Salesforce.com sneak up on it. When SaaS becomes too big of a threat, Oracle buys a seat at the table to compete. It’s becoming increasingly clear that Oracle is threatened by the cloud movement.”
Oracle can no longer afford to ignore the cloud computing market, which is expected to be worth almost $400 billion by 2018. RightNow is just the first step, and the company is bound to make more SaaS acquisitions.
Salesforce.com (NYSE:CRM) recently reported third quarter revenue of $584 million, up 36%. Net loss was $3.8 million or $0.03 per share compared to net income of $21.1 million or $0.16 per share last year. Non-GAAP EPS was up 6% to $0.34. Analysts expected non-GAAP earnings of $0.31 on revenue of $572 million. Non-GAAP gross margin remained unchanged at 82% compared to last quarter and the year-ago quarter. The company ended the quarter with a $1.3 billion cash balance.
Salesforce.com’s total employee base is nearly 7,000, up 46% over 2010. It expects the fourth quarter to be another record quarter for organic hiring. Subscription and support revenue in the second quarter was $549 million, up 36%, while professional services and other revenue was up 34% to $35 million. Deferred revenue was $918 million, an increase of 32% y-o-y.
On a regional basis, revenue in the Americas increased 36% from a year ago to $397 million. European revenue of $104 million rose 29% year-over-year. Asia revenue of $83 million increased 31%. The company said Japan business continued to recover and posted strong new business growth in the third quarter.
For the fourth quarter, Salesforce.com expects revenue in the range of $620 million to $624 million and non-GAAP EPS of $0.39 to $0.40. Analysts expect third quarter earnings to be $0.40 on revenue of $505.2 million.
For full fiscal year 2012, the company raised its revenue guidance to a range of $2.255 billion to $2.259 billion, or 36% growth, from its earlier guidance of 2.22 billion to $2.23 billion. Salesforce.com reported revenue of $1.66 billion in fiscal year 2011. For fiscal year 2013, the company projected revenue of $2.88 billion to $2.92 billion, versus the $2.79 billion expected by analysts. The stock is trading around $112 with a market cap of about $15 billion. It hit a 52-week high of $151.26 on December 9, 2010. Its stock tumbled from $136 last week to a 52-week low of $105.06 on Monday as billings growth was disappointing at 29%, compared to analyst expectations of 33%.
While Salesforce.com has pioneered cloud computing for all practical purposes, the landscape is changing, and there is pressure not only from Oracle, but also players like Zoho in the low-end, eating away at their customer base with a much lower price-point. Zoho, today, is an over $100 million revenue company, and their CRM SaaS business is doing very well. Sridhar Vembu, CEO of Zoho, intends to give Salesforce.com a run for their money, and Zoho has every intention of becoming a billion dollar company. Knowing Sridhar, he will make it happen.
Pressed on both ends, Salesforce.com has a challenging 2012 ahead.