Posts Tagged ‘Cloud’

Yes, the Cloud Software Companies Will Fly High Again

April 23rd, 2014

It has been a tough couple of months for cloud software companies. As I noted last week, the value of the companies in the cloud index tracked by Bessemer Venture Partners had fallen by about 26 percent from its peak reached a couple of months ago.

Now an analyst with Morgan Stanley is making the case that the recent drop is a buying opportunity. In a note to clients this morning, Jennifer Swanson Lowe said that after checking in with corporate CIOs, she’s convinced the outlook is turning upward again for companies like, ServiceNow, NetSuite, Workday and Veeva Systems.

Shares of the publicly traded cloud software companies had been overvalued. Five of the most expensive ones she cited sported an enterprise value of nearly 23 times sales, more than triple the valuation ratio for the most expensive software companies from the years 2002 to 2011. Now that their share prices have come down, so has that ratio: It’s now between 14 and 15 — still higher than the historical average, but once you account for the fact that they are growing revenue at roughly double the historical rate for software companies, it’s much more reasonable.

That’s because corporate CIOs are boosting their spending on software-as-a-service applications this year. The big categories are sales force automation and customer support, which is good news for both and ServiceNow but also for Veeva Systems, a cloud software company that targets the pharmaceuticals industry. In a survey, 64 percent of CIOs said they planned to boost their spending on SaaS applications by anywhere from one percent to 15 percent. “Stocks have sold off, but demand remains healthy,” Lowe wrote.

The company with the best outlook this quarter is ServiceNow, the creator of cloud-based customer support software, which reports earnings after the markets close on Wednesday. Lowe said the consensus estimates look conservative. Analysts polled by Thomson Financial expect a loss of eight cents a share on revenue of $134.6 million. Lowe expects a smaller loss of five cents a share. “We continue to view NOW as one of the strongest growth stories in SaaS, and expect this momentum to continue for the foreseeable future,” she wrote.

She’s also bullish on Salesforce, saying that its effort to build a strong marketing software business on top of its acquisitions of Buddy Media and ExactTarget remains an “underpenetrated growth opportunity poised to drive the next leg of growth.” She has also warmed up to shares of Workday, which she says have been too expensive to buy until recently, but are now trading at a discount of 31 percent to her price target of $102.

Shares of several of the companies mentioned in the note rose today. Workday was up more than three percent today to $80.41. ServiceNow rose nearly two percent to $54.08. Salesforce climbed one percent to $56.78. Veeva Systems rose four percent to $22.96, and NetSuite was up two percent to $84.


Zebra’s $3.45 billion enterprise Internet of things play: Cloud software will be the glue

April 16th, 2014

Zebra Technologies’ $3.45 billion purchase of Motorola Solutions’ enterprise business is really a bit play for the “enterprise Internet of things” where asset tracking as well as the data thrown off from it lead to business advantage.

The purchase makes a lot of sense on many levels, but it’s worth noting that Motorola Solutions’ larger enterprise unit could give Zebra indigestion. Zebra has $1 billion in annual sales compared to Motorola Solutions enterprise unit, which has $2.5 billion in annual revenue.

Zebra is using $200 million in cash and $3.25 billion in debt to fund the deal.

The debt load and size differential could be worrisome, but strategically the deal makes sense. Zebra specializes in RFID systems and bar codes to track inventory as well as analytic software. Motorola Solutions’ enterprise unite adds mobility to the equation as well as strength in manufacturing and logistics.

The two companies together will be the front end of asset tracking as well as sensor networks and be able to utilize that data thrown of from RFID, mobile devices and bar codes.


IBM wins multimillion deal for Coke’s SAP cloud

April 8th, 2014

Drinks giant wants to unify platform across regions.

IBM will host and manage Coca-Cola Amatil’s cloud ERP in a deal worth millions of dollars.

The agreement will see IBM manage the SAP software in a cloud hosted at its own data centre in Sydney.

According to IBM, the cloud platform will “streamline CCA’s order management and distribution processes; increase operational efficiencies; and deliver consistent and exceptional quality of customer experience across the two geographies”.

Grant Thomson, cloud business leader at IBM, said: “CCA will be able to leverage best-practice processes from its Australian operation and apply them to the rest of the South Pacific region.”

CCA’s Australian and Indonesian operations will be onboarded first.

The system will later expand to CCA’s other operations in New Zealand, Papua New Guinea, Fiji, and Samoa.

“By using a common cloud platform across Australia and Indonesia, we will be able standardise and automate our operations and bring a consistent level of efficiency to our Indonesian business,” said CCA CIO Barry Simpson.


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