Jive’s IPO Prospects

While the consumer social networking market has grown phenomenally, reflected in the more than 750 million Facebook users, the enterprise social networking market is only marginally tapped. LinkedIn is the largest professional network with more than 120 million members, yet it does not fall in the enterprise social networking segment. IDC estimates that the enterprise social business software market will be worth $10.3 billion by 2013. Palo Alto–based Jive Software is one company targeting this segment. Other companies include Salesforce.com with their Chatter product, and a startup called Yammer.

Jive’s Financials
Jive is known to be the largest and fastest-growing independent vendor in the Social Business Software market. Their products, such as Jive Engage and Jive Forums enable employees and customers in an organization to interact with each other through a social web. Jive claims to have 13.6 million users spread across their 635 customers, a list that includes the likes of HP and T-Mobile.

Founded in 2001, Jive is reported to have earned $18 million revenues in the second quarter this year. A year ago, they had reported revenues of $10.5 million. By segment, private cloud revenues contributed 41% of their quarter’s revenues. However, despite the strong growth in revenues, the company remains unprofitable. They reported a loss of $16 million in the recent quarter compared with a loss of $7 million reported a year ago. For fiscal 2010, they earned revenues of $46 million, a significant growth over previous year’s revenues of $30.0 million and 2008 revenues of $16.9 million.

They have to date received funding of more than $57 million from Sequoia Capital and Kleiner Perkins Caufield & Byers. Their most recent round of funding of $30 million came in July 2010. Bloomberg reports value Jive at $1 billion, while Gartner has a relatively conservative valuation estimate of $70 million.

Jive’s Acquisitions
Recently, Jive has also been on an acquisition mode. In May of this year, they bought nabbing OffiSync, a Seattle-based provider of social extensions for Microsoft Office, for an estimated $25 million-$30 million. OffiSync was founded in 2010 to help users integrate Microsoft products such as Outlook, Office and SharePoint with other online tools. Through the acquisition, Jive will be able to attract the more than 600 million Microsoft users by giving them access to their social networking tools.

A month earlier, they had purchased Proximal Labs, a company that combines expertise around big data to enterprise social networks. Proximal builds apps that can integrate into a social media platform and by learning about users are able to offer context based recommendations. Jive plans to use Proximal’s tools to combine their internal collaborative communities with the social web.

As part of their growth plans, Jive also recently recently filed for an IPO to raise $100 million.  Many analysts believe that Jive may be too small to justify an IPO, given that their annual revenues are still under $100 million. But Jive plans to change that and is looking for funds to invest in market expansion in markets outside of the U.S. In 2010, Jive earned 20% of revenues from international markets, a contribution that they are looking to increase in the near future. Surely the recent acquisitions will help them achieve this international growth.

Overall, Jive is a good company in a hot space with a lot of potential. It is somewhat over-valued, but the valuation will probably be rationalized over the next year.