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SaaS Growth Story Back On Track

Posted on Friday, Dec 10th 2010

Over the past two weeks, we have looked at the CRM and talent management sectors in the SaaS market. The talent management sector is consolidating at a fast pace and even SaaS CRM is seeing acquisitions in social networking. In August, Citrix (NASDAQ:CTXS), a leader in virtualization, acquired VMLogix, a provider of virtualization management for private and public clouds, while NetSuite (NYSE:N) and Concur (NASDAQ:CNQR) have not had any M&A activity in the recent past.

Citrix’s Financials
In its latest third quarter, Citrix reported revenue of $472 million, up 18%. Net income was $88 million or $0.46 per share versus $53 million or $0.29 per share last year. The company repurchased shares for $125 million and ended the quarter with $1.6 billion in cash and marketable securities.

New license sales were $149 million, up 15% from last year, driven by growth in both the Desktop and Data Center businesses. Revenue from product licenses grew 18% to $152 million, license updates increased 15% driven by strong year-to-date demand in the XenDesktop Trade-up program, and Technical Services grew 30%. Revenue from Citrix’s Online SaaS services grew 16% to $92 million led by the collaboration products in the GoToMeeting family.

Revenue from the company’s Desktop business, which includes both Application and Desktop Virtualization solutions, was $277 million, up 15%. Revenue from the Data Center and Cloud Computing business, which provides Application Networking and Server Virtualization solutions, was up 47% to $84 million led by NetScaler products.

Citrix expects fourth quarter revenue of $500 million to $510 million and EPS of $0.47 to $0.49. For fiscal year 2011, Citrix expects revenue to range from $2.04 billion to $2.07 billion. Its annual revenue in 2009 was $1.58 billion, and the company expects revenue of $1.845 billion to $1.855 billion for fiscal year 2010. The stock is trading around $70 with market cap of about $13 billion. It hit a 52-week high of $71 on September 24.

Chart forCitrix Systems, Inc. (CTXS)

Concur’s Financials
Concur is a SaaS provider in the niche area of expense management and has annual revenue of $247.6 million. In its fourth quarter results, the company reported revenue of $77.5 million, up 20%. Net income was $3.5 million, or $0.06 per share, down from $5.9 million, or $0.11 per share last year. For fiscal year 2010, revenue was $292.9 million, up 18%, and net income was $20.6 million, or $0.39 per share compared to $25.7 million, or $0.50 per share, for fiscal year 2009. Cash and investments, net of customer funding liabilities and debt, increased approximately $70 million by quarter end including the exercise by American Express of its $50 million warrant.

Concur expects first quarter revenue to increase 17% y-o-y and net income per share to be $0.05. It expects the fiscal year 2011 revenue growth rate to be higher than the fiscal 2010 revenue growth rate. The stock is trading around $54 with market cap of about $2.8 billion. Its 52-week range is $36.98–$55.37.

Chart for Concur Technologies, Inc. (CNQR)

NetSuite’s Financials
NetSuite is a SaaS ERP vendor with annual revenue of $166.5 million. Enterprise resource planning (ERP) is the third-largest SaaS revenue generator with $1.3 billion revenue in 2009. NetSuite for its third quarter reported revenue of $49.7 million, up 19%. Net loss was $7 million or $0.11 per share compared to a loss of $8 million or $0.13 per share last year and non-GAAP EPS was $0.04 per share. The company ended the quarter with $101.12 million in cash and cash equivalents.

NetSuite raised its 2010 outlook to revenue of about $192 million and EPS of $0.12 to $0.13. Its earlier revenue guidance was $188 million to $190 million. The stock is trading around $26.5 with market cap of about $1.7 billion. Its 52-week range is $11.62–$27.41.

Chart forNetSuite Inc. (N)

The SaaS market had worldwide revenues of $13.1 billion in 2009, and IDC expects revenues to reach $40.5 billion by 2014. The market seems to be resuming its growth story and SaaS stocks are trading close to their 52-week highs. And as growth continues, more consolidation will follow.

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