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Top 12 Enterprise Software Stock Bargains

Posted on Tuesday, Sep 30th 2008

Here is a compilation of top 12 enterprise software stocks worth watching, especially after yesterday’s beating in the stock market. If you have the nerve for it, you can consider buying some.

1. Oracle

In the recently reported quarterly results, Oracle did bring some shine into the market with impressive results which sent the stock soaring 16% during the week to $21. Oracle has been growing through acquisitions of companies like BEA and Hyperion with the target of becoming, among other things, also the leader in the middleware market. Yesterday’s stock crash resulted in a 9% drop in Oracle’s share price. At its current rate of $18.77 it is still trading above the 52-week low of $17.84 it reached earlier last month.

oracle chart

2. SAP

The world’s largest business software provider and the third-largest independent software vendor is a living example of the on-demand and extended enterprise trends. SAP has started focusing on SaaS and the high end of the SME market. But unlike Oracle, it is neither into the database business nor into quick acquisitions. A few acquisitions of entities like Citrix. The stock fell 6% yesterday and is trading at $54.30.

sap chart

3. VMWare

VMWare has been facing tough times with Microsoft’s entry into the hypervisor business followed by CEO Diane Green’s exit. The stock had been dubbed the next Google, thanks to its impressive IPO listing. After reaching a high of $125 last year, the stock closed yesterday at $26.00, falling more than 10% intraday, making me repeat my question: is this the time to buy the stock? 
 
vm chart

4. Informatica

Informatica is a leading data integration enterprise that provides end-to-end data integration products, which I have always recommended as a potential acquisition target for Oracle and Salesforce.com. The stock closed at $12.77, after recovering marginally from the 52-week low of $12.70. Given the current climate, I am pegging this as a very likely acquisition target in short order.

informatica chart

5. Microsoft

Microsoft’s enterprise business got stronger when they announced their entry into the hypervisor business. The company has been growing the inorganic way, with acquisitions of companies like aQuantive and Mobicomp, while completely ignoring the need to address SaaS, in my view, a huge mistake. The stock is currently trading at $25.01, having recovered from its 52-week fall last month to $23.50.

microsoft chart

6. Salesforce.com

The posterchild for SaaS, Salesforce.com has grown through the successful deployment of the concept of an extended enterprise. Their high standard of performance can be gauged through their recent integration of Google Apps into CRM applications to make the first cloud computing suite for enterprises. I am a great believer in Salesforce.com’s pioneering thinking, which focuses on not only platform, but ecosystem synergy as well. In yesterday’s crash, the stock reached a new 52-week low of $44.17. May be a great buying opportunity.

crm chart

7. Symantec

I have been bullish on the managed security services market, and Symantec has a huge role to play in the segment, if only they could fix some of its glaring operational gaps and make the right acquisitions. Symantec’s information security and compliance software and solutions have huge gaps in licensing management and customer and technical support, areas which are not being addressed in their acquisitions of Vontu and Altiris. The stock is trading at $18.62 after having fallen 6% in yesterday’s crash.

smy chart

8. McAfee

McAfee has been following a strategy of building on data protection and risk management tools coupled with a marketing campaign to increase brand awareness. Add to that their emerging market strategy where they have shown gangbuster growth rates. It is currently trading at $33.43.

macafee chart

9. SuccessFactors

SuccessFactors is a SaaS company which recently went public and deals in talent management. The company’s growth opportunities are visible as they recently tied up with IBM Global Services to roll out talent management software to corporate customers. I am a great believer in the industry and the company’s management. At the current stock price of $11.07, the stock is worth a look.

success chart

10. Taleo

Taleo is another talent management company and is in fact the leader in the industry. With the acquisition of Vurv, it just got bigger. They have managed to align themselves not only with the extended enterprise solution, but also with the online jobs vertical very well. Earlier this year, they tied up with Paychex to offer SMBs an integrated HR solution and continue to innovate their products to offer up-sell opportunities to existing customers. With Michael Gregoire’s execution capabilities Taleo is also worth watching. Getting closer to PayChex may also mean that they are on the latter’s target list.

taleo chart

11. Concur

Concur Technologies is an on-demand, SaaS provider that combines travel and expense management for employees of an enterprise by providing a system to reimburse employees’ expenses as well as pay invoices from vendors. It not only integrates the workflow of travel bookings and expense management within the company, but also brings travel suppliers into the fold. For two years, the company has been on Fortune’s list of 100 fastest growing small businesses. I am very bullish on the stock because it caters to the SME segment. With Steve Singh’s management capabilities, strategic acquisitions of Gelco, and the integrated product offering, Concur is definitely on a growth path. The stock is currently trading at $38.23 after having reached a 52-week high of $50.00 earlier last month.

concur chart

12. RightNow

Last but not the least, RightNow provides on-demand CRM solution with need-based access to relevant system data. I like RightNow’s CRM portfolio which includes sales, retail, service, and marketing coupled with the automation efficiencies acquired through the purchase of Salesnet. The stock is currently trading at $11.36.

rightnow chart

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