At the end of 2020, I wrote Big Idea 2021: SaaS Companies Will Create 10 Million Jobs with the central thesis that SaaS players would evolve into PaaS to create deeper moats around their core market positions and gain access to the related force multiplier.
To recap on the assumptions:
SAP (NYSE:SAP) reported its earnings on October 18 for the third quarter of fiscal 2007. Its revenues were €2.42 billion up 9% y-o-y. Net income was €408 million, a y-o-y increase of 10% over €370 million last year. EPS was €0.34, up 13% from €0.30 in Q3 2006. Software and software related service revenues were €1.74 billion, an increase of 13% over €1.54 billion in Q3 2006. Pure Software revenues were €715 million, up 11% y-o-y.
As per the earnings call, SAP has reiterated that its growth strategy is to continue to grow faster than the market by expanding its addressable market. It expects stable growth from its traditional businesses of horizontal and vertical applications, and accelerated growth from the SME and business user segments of the business process platform. The Business Users, by the way, is an untapped base that SAP really wants to penetrate, to raise its adoption and usage in the enterprise customers. >>>
Oracle (NASDAQ: ORCL) reported its earnings for Q1 2008 in September. Revenue was $4.5 billion, a y-o-y increase of 26%. Its EPS was $0.16, up 28% over Q1 2007. Net income was $840 million, an increase of 25%.
Software revenues increased 26% over last year to $3.5 billion with new software license revenues increasing 35% to $1.1 billion. Database and middleware new license revenues saw a y-o-y growth of 23% and applications new license revenues increased 65%. Services revenues increased 25% to $1.1 billion over the first quarter of fiscal 2007.
As I mentioned in an earlier post on Oracle, its on-demand offering is miniscule and it looks like it will remain that way. In the earnings call, Larry Ellison has said that SAAS involves a high cost of sales and cost of implementation. It would not be following SAP in luring the SME SAAS market as it would need to spend on new product development and sales teams. It would rather wait to see how SAP makes money out of it. Interesting conclusion coming from Larry, given that he is a seed investor in both Salesforce.com (Nasdaq: CRM) and NetSuite (about to go public). >>>
I had written about Paychex more than two years back when I started this blog in a post called Microsoft’s Two Should-Be Acquisition Candidates. Since then Paychex has grown steadily, and market cap has appreciated from $12.3 Billion to $15.62 Billion. I will look at it in more detail in this post.
Paychex (NASDAQ:PAYX) is a leading provider of payroll and benefits outsourcing solutions in the SME market with annual revenue of $1.9 billion and net income of $514 million in fiscal 2007. Its biggest rival is ADP which I will cover soon. Based in New York, the company has more than 100 offices with 11,700 employees and 561,000 payroll clients. Paychex takes care of a vital but simple business process for its clients, and has thus positioned itself as an essential piece of the workflow at numerous companies. >>>
In some of my earlier posts, I have talked about how Intuit has successfully penetrated SME with its killer app of small business accounting software. You have also been reading my interview with Jim Heeger, who has discussed Intuit’s historical strategy in a fair bit of detail. In this post, I will look at Intuit’s current financials and strategy in more detail.
Intuit (Nasdaq: INTU) is the leading provider of accounting and tax solutions in the SME space with a lion’s share of the market, revenue of $2.67 billion, market cap of $10.62 billion, and 8,200 employees in fiscal 2007. Founded in 1983 and based in California, its business is organized into six segments: QuickBooks, Payroll and Payments, Consumer Tax, Professional Tax, Financial Institutions and Other Businesses. >>>
According to a recent Forrester report, 1 billion PCs will be in use by 2008 and 2 billion PCs by 2015. A beneficiary of this market is Dell, which is the No.2 vendor in the PC market with a 16.1% market share (IDC, Q2 2007). However, a majority of the next billion PCs will likely be convergence devices and as I have said before, Dell needs to come up with a convergence device strategy to be a true beneficiary. As it stands, I haven’t seen one yet.
Dell (NasdaqGS:DELL), for long, had been a darling of Wall Street, but fell out of favor as its direct selling model became commodity. Its business is organized in the geographic segments, Americas; Europe, Middle East and Africa (EMEA), and Asia Pacific-Japan (APJ). Its products and services are organized under its core products of Desktop PCs, Mobility, Software & Peripherals, Servers & Networking, Enhanced Services, and Storage. It is the No. 4 vendor in the total disk storage systems market with 9.8% share and in the server systems market with 11.6%.
Earlier in January, Michael Dell, the founder of the company, returned as CEO replacing Kevin Rollins, under whose stewardship, the company has floundered. >>>
IBM announces earnings later today. I have written several pieces on IBM’s various activities, which can be found here, here, and here. In this post, I will look at IBM as a whole, and how their attempt to increase margins by increasing the software portion of the portfolio has been faring.
International Business Machines Corporation (NYSE: IBM) is one of the world’s largest IT company with revenues of $91.4 billion, in 2006. Based in New York, it operates in 170 countries with about 30% of its employees now in the Asia Pacific, as a result of worldwide restructuring. As per IDC, IBM is the leading services vendor with $49.3 billion in services revenue in 2006. It is also the leader in the worldwide server systems market with 31% market share. In the total worldwide disk storage systems market, it has 19.3% market share, close on the heels of HP with 20.6% market share. It is also a leader in the worldwide software configuration management market. >>>
As per a recent Forrester report, 1 billion PCs will be in use by the end of 2008 and 2 billion by 2015. With the increasing trend toward convergence devices, a majority of the next billion PCs will be convergence devices.
In this post, I will look at HP, a company that has not only engineered an incredible turnaround under the no-nonsense leadership of CEO Mark Hurd, but has managed to show growth and sustainability in markets that competitors like IBM have exited under pressure from China. >>>
There has been an explosive growth in digital content in the home and the office – from high-definition video, music, blogs and podcasts, to CAD and other large graphics files, and archived emails. The growing online video trend and the increasing popularity of YouTube and the likes is a major driving force for the increasing demand for massive amounts of hard drive storage. All the videos that get downloaded or uploaded need to get stored somewhere, right? In this post, I will analyze Seagate as an online video beneficiary.
Seagate Technology (NYSE: STX) is a leader in the design, manufacturing and marketing of rigid disc drives. Based in California, it has 54,000 employees, of which 43,000 employees are located in its Asian operations. It has around 3,857 U.S. patents and 761 foreign patents. Seagate acquired Maxtor in May 2006 and EVault in January 2007. The disc drive industry is undergoing consolidation with TDK acquiring Alps and Western Digital acquiring Komag in 2007. >>>
The Online Video momentum is driving growth and activities in the networking equipment and infrastructure industry. 3Com just reaped the benefits in form of a Private Equity transaction. Akamai is another strong beneficiary.
This post will look at the topic from the application delivery networking angle. There is an increasing use of web-based business applications and use of PDAs, smartphones, and notebook computers to access multimedia applications over the Internet. A major beneficiary of this trend is F5. >>>
In my series on Online Video Beneficiaries, I have covered the network players like Cisco. In this post, I will look at the application acceleration angle. Gartner estimates that the market for application acceleration will exceed $3 billion by 2010. There has been a meteoric rise of online traffic with the online broadcast of live events and the popularity of devices like iPods and iPhones and the resulting boom in downloading as well as uploading of music and videos. A major beneficiary of this surge in online traffic and multimedia activity that requires fast and reliable transfers is Akamai.
Akamai Technologies(NASDAQ: AKAM) is the leading content delivery network (CDN) provider that accelerates the delivery of content and applications over the Internet. With the Internet playing a major role in everyday life and applications, Akamai’s business is booming. Its annual sales in 2006 went up 51% to $428.7 million and have more than doubled over 2004. It acquired one of its biggest competitors, Speedera in June, 2005. It followed this up with Nine Systems in December 2006 to build out its video serving capability. In March 2007, it acquired Netli to expand its application acceleration technology as well as its presence in the Software-As-A-Service (SAAS) market. In April 2007, it bought Red Swoosh to enhance its distributed Internet presence. >>>