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More SaaS Near 52-Week Highs

Posted on Monday, Aug 17th 2009

Through the economic downturn, marketing organizations have had to become more accountable to businesses, leading to a rise in the use of Web analytics. According to a recent Forrester report, 73% of businesses use Web analytics measurement technologies. The report goes on to say that US businesses will spend $953 million on Web analytics in 2014, with an average CAGR of 17%. Let’s take a closer look at the performance of Web analytics player Omniture.

On July 22, Omniture (NASDAQ:OMTR), with annual revenue of $296 million, reported its second quarter results. Q2 revenue grew 22% to $87.6 million. Net loss was $4.9 million or $0.06 per share compared to net loss of $6.5 million or $0.09 per share in Q208. Non-GAAP net income was $10.5 million or $0.13 per share compared to net income of $7.3 million or $0.10 per share in Q208. Analysts expected earnings of $0.14 per share on revenue of $88.5 million.

Omniture ended the quarter with total cash of $131 million, up $36 million from the end of 2008 and up $6 million from the prior quarter. Deferred revenue increased to $121 million, up $4 million from the prior quarter.

During the quarter, Omniture added over 150 new customers compared to 200 new customers last quarter.  Its total customer count is over 5,000 and overall retention rates are around 90%. The company continued to grow its overall market share with the ratio of competitive displacement at a favorable 6 to 1.

Product revenues were $77.4 million while professional services revenues were $10.2 million and represented approximately 12% of total non-GAAP revenue. International revenues grew 21% to $24.7 million or 28% of total revenue, despite the strengthening of the US dollar.

For the third quarter, Omniture is targeting flat revenues from the second quarter, which is less than the average analyst estimate of $90.4 million.

Omniture believes that the economic environment has stabilized, but hasn’t as yet seen any signs of near-term improvement and gave a cautious outlook. The company said that it is still targeting 15% annual revenue growth for 2009. The stock is currently trading around $14.58 with a market cap of about $1.15 billion. It hit a 52-week high of $15.21 on August 13.

I feel that Omniture will find a much larger TAM if it broadens its market from web analytics to search analytics, which I expect will become a major category in itself over the next five years. For more on this, you can read my coverage of one of my clients, Enquisite, on Deal Radar.

Chart for Omniture Inc. (OMTR)

On July 22, Citrix Systems, Inc. (NASDAQ:CTXS), the global leader in application delivery infrastructure with annual revenue of $1.58 billion, reported second quarter results that beat estimates. Q2 revenue was $393 million, compared to $392 million in Q208. Net income was $43 million, or $0.23 per share, compared to $35 million, or $0.18 per share in Q208. Non-GAAP net income was $72 million, or $0.39 per share, versus analyst estimates of $0.38 per share on revenue of $387 million. Q1 analysis is available here.

Deferred revenue was $538 million, compared to $476 million last year. Gross margin improved to 88.8% from 88.3%. Cash flow from operations was $86 million and cash in investments have increased to nearly $1 billion. The company repurchased 1.3 million shares for about $40 million and is left with over $300 million in current authorization.

Revenue increased in the Americas region by 3% $174 million, decreased in the EMEA region by 12% to $113 million, and decreased in the Pacific region by 4%.

For three quarters in a row, license update revenues helped offset decline in product license revenues. Product license revenues decreased 15% while revenues from license updates grew 9%. Technical services revenues grew 3% and online services revenues grew 18% to $75 million. With customers focusing more on saving costs, Citrix has seen a shift in its business mix. SaaS and license updates increased to 57% of total revenues, led by the collaboration products and a 40% increase in revenues from the GoToMeeting family. Of this, new licenses accounted for 33% and tech services 10%. I have always been extremely bullish about Citrix’s SaaS and collaboration offerings, so I am happy to see the results from this group.

The App virtualization business was impacted the most by the downturn, with revenues declining 8%, while the app networking business was up 4% to $57 million driven by enterprise customers. In server and desktop virtualization, revenues grew more than 50% q-o-q and over 250% from last year driven by the performance of XenDesktop, which started shipping last year.

Citrix has a 20-year partnership with Microsoft in application and desktop virtualization, and they recently expanded this relationship to the adjacent server virtualization market. The company’s new Citrix Essentials product line will extend the enterprise management capabilities of Windows Server 2008 Hyper-V and System Center.

As part of its strategy to focus on “consumability,” in May Citrix made available the Citrix Receiver application on the Apple App Store, which will provide users with access to Windows applications and documents from anywhere.

For the third quarter, Citrix expects revenue to be flat compared to Q308. It is currently trading around $35.60, dropping from its 52-week high of $37.07 on July 23, with a market cap of $6.52 billion.

Chart for Citrix Systems, Inc. (CTXS)

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