SaaS CRM On A High

The SaaS market had worldwide revenues of $13.1 billion in 2009, and IDC expects revenues to reach $40.5 billion by 2014. Research firm Gartner says SaaS accounted for nearly 24% of total CRM market revenue in 2009. SaaS is forecast to account for 26% of total CRM market revenue in 2010. Let’s take a look at two SaaS CRM vendors, Salesforce.com (NYSE:CRM), the big daddy of SaaS CRM, and RightNow (NASDAQ:RNOW).
Salesforce.com’s Financials
Salesforce.com with annual revenue of $1.3 billion recently reported third quarter revenue of $429 million, up 30% and EPS of $0.15, down 6%. Non-GAAP EPS was up 14% year-over-year at $0.32. Analysts expected GAAP earnings of $0.13. The company ended the quarter with $1.8 billion in cash.

Subscription and support revenue was $403 million, up 31%, while professional services and other revenue was up 10% to $26 million. Salesforce added 4800 customers, and its total customer count is now 87,200, up 28% or 19,300 from last year. Dell recently announced that it has extended Chatter to more than 90,000 employees around the world, joining the more than 60,000 Salesforce.com customers who have adopted the technology. Chatter, a collaboration and application platform that includes a social networking feature à la Facebook, was released in June of this year.

For the fourth quarter, Salesorce.com expects EPS of $0.06 to $0.07 and non-GAAP EPS of $0.27 to $0.28 on revenue of $447 million to $449 million. It raised its fiscal 2011 revenue guidance to a range of $1.647 to $1.649 million from its earlier guidance of $1.595 billion to $1.6 billion. Full-year EPS is expected to range from $0.46 to $0.47. The company also initiated revenue guidance for fiscal year 2012 with projected revenue in the range of approximately $1.97 billion to approximately $2.0 billion. The stock is trading around $145 with market cap of about $18 billion. It hit a 52-week high of $145.43 on November 24.

Recent Acquisitions
In September, Salesforce.com acquired enterprise chat startup Activa Live. Currently, Activa Live is an application on Salesforce.com’s App Exchange platform, and Salesforce.com is expected to integrate some of Activa Live’s features with Chatter. As mentioned by Leena Rao of TechCrunch, one feature of Activa Live is that it reveals what a visitor is typing before his or her message is sent. This helps live chat agents to anticipate queries and respond faster than with normal chat software.

Salesforce kicked off its acquisition spree this year with Jigsaw, a crowd-sourced contact data provider for $142 million. RightNow, with annual revenue of $152.7 million, acquired social networking company HiveLive for $5.9 million last year.

RightNow’s Financials
Last month, RightNow reported third quarter revenue of $48.6 million, up 25%. Net income was $2.9 million or $0.09 per share versus $2 million or $0.6 per share last year. RightNow signed 17 deals over $1 million.

For the fourth quarter, RightNow expects revenue to be about $49.3 million and EPS $0.09. For the full year 2010, RightNow raised its guidance to revenue of $183.5 million from earlier guidance of $175 million to $180 million and EPS of $0.24 from earlier guidance of $0.18 to $0.22.

RightNow recently announced the appointment of Wayne Huyard as president and COO. The company ended the quarter with about $109 million in cash and investments. It recently announced that it priced an offering of $150 million convertible senior notes. RightNow will be using the proceeds for general corporate purposes, including acquisitions and strategic transactions, stock repurchases, and working capital. The company also announced that it will increase its share repurchase authorization by $15 million to $25 million.

The stock is trading around $26 with market cap of $830 million. It hit a 52-week high of $27.60 on November 9.

Both SaaS CRM companies have seen strong growth aided by the social networking and cloud computing trends and are trading close to their 52-week highs.