It's rare when you will see a post in this blog about Saas and its place in the financial markets. But a report by former ReadWriteWeb-er Bernard Lunn shines an interesting perspective on the SaaS market.
The report is noteworthy as it comes on the heels of the annual earnings report from Salesforce.com, the first SaaS provider to hit $1 billion in annual revenues. We feel the SaaS market may be the most pivotal sector of the cloud computing world and we expect several other companies in the SaaS market to also reach the $1 billion mark.
We think it's important to look at the market from an investor perspective to get a view of the overall enterprise sector, which is now deeply affected by the onslaught of cloud computing.
SaaS providers should be smiling about this kind of report as it demonstrates that they have a place in the IPO market. Jive Software is believed to be moving toward an IPO.They are just one example of many companies we expect to see move in this direction.
The report looks at the following:
- Early stage companies, in particular those with venture capital funding
- Mature ventures with the financial strength to be IPO candidates
- Publicly traded companies
For our purposes, we find the Salesforce.com analysis of most interest. The report gives reasons why Salesforce.com is either over or undervalued.
Here's an excerpt from the report about why Salesforce.com may be overvalued:
"Marc Benioff is selling shares. This was announced in the previous quarterly report on November 25th 2009. The % of his shares that he "may" be selling is significant. He has basically announced that he "may" sell 2,750,00 shares out of a total of 13,371,006 shares he owns. That is 21%. Whether investors are concerned about this remains to be seen. Insider selling is often a trigger for smart outsiders to sell. Currently he is selling shares at a rate of 10,000 per day. Maybe he wants to give serious money to charity and who can fault him (or Bill Gates) for doing that? Concern factor: low."
"Internet market leaders are never cheap stocks. Waiting for these leaders to become bargains has seldom worked. The only times they are bargains are when other stocks are super- bargains."
The market is still young even though SaaS is mainstream. A report like this one helps provide additional perspectives on the state of the market.