Financial results for November 2005
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A round-up of financial results in November 2005
With a fast-increasing number of early adopters converting pilots into company-wide implementations, and with rock bottom entry prices attracting a steady flow of new sign-ups, revenues at software as a service (SaaS) 'pure-plays' is rising at spectacular rates.
Centre stage in the ever-expanding on-demand CRM arena, Salesforce.com exceeded expectations in the company's third quarter ending 31 October 2005, reporting revenues of $82.7 million - a 78% increase on the same period last year. That puts it on target to reach revenues of around $308 million for the year to 31 January 2006.
The online CRM heavyweight signed up approximately 1,800 new customers and 43,000 new paying subscribers to bring its customer total to 18,700 and its subscriber base to 351,000. Playing safe, the company has forecast more conservative growth of around 50% for fiscal 2007 - revenues should be in the region of $460 million. To drive that the company is planning a rapid expansion of its workforce over the next year as part of efforts to head off the arrival of the industry's largest applications vendors - Microsoft, Oracle, Sage and others - in the online space.
Salesforce is not the only company with revenue growth fuelled by the on-demand CRM model. RightNow Technologies reported a 41% increase in revenues during its third quarter to $23.3 million, increasing the total number of active customers to 1,400.
RightNow's CEO, Greg Gianforte, is hoping the company's pace will increase even further as a result of uncertainty following the swelling of Oracle's CRM portfolio. As well as its own CRM product, Oracle has acquired CRM software from Siebel, PeopleSoft, JD Edwards and Retek. Gianforte is offering Siebel users six months of RightNow CRM for free, supposedly reducing the cost of a two-year contract by 25%.
As Oracle works out its roadmap for those multiple products, several analysts are confidently predicting that Siebel's CRM product (the one with the largest installed base) will eventually emerge as Oracle's flagship CRM offering.
That view is helped by the publication of what is likely to be Siebel's last set of results prior to being absorbed by Oracle. Showing something of a bounce back, total revenues for the company's third quarter grew 10% to $347.9 million while profits almost doubled to $34.7 million - a much healthier picture than before Oracle launched its $5.85 billion agreed acquisition bid. In the on-demand area alone, Siebel's total contract value grew by 49% year over year to $11.3 million, with user numbers growing to 44,300.
But none of these companies is acknowledged as the market leader in on-demand applications delivery. That accolade goes to the darling of the online web conferencing movement, WebEx. In the three months to 30 September, the company says it had the strongest quarter, in terms of new orders, in its history, with revenues jumping 23% to $78.6 million. Profits were also solid, up from $11.8 million to $12.7 million quarter-on-quarter.
The collaboration software vendor was recently ranked by IT market watcher IDC as the number one SaaS provider in terms of sales. IDC's report found that "not only are cost-savings benefits and rapid implementation times fuelling overall SaaS adoption, but also intangible benefits such as increased employee productivity and efficiencies are being recognised". Intranets.com, acquired by WebEx in September, also made it onto IDC's list of the top 25 on-demand software providers.
PC Highs and lows
At the other end of the IT industry revenue scale, the battle for the desktop intensified as Dell stumbled (by its fabulously successful standards) and Hewlett-Packard (HP) showed a revived performance. In its third quarter ending 28 October, revenues at Dell's desktop PC business fell for the first time in its history, dropping 2% to $5.1 billion. PCs are still its biggest revenue puller, accounting for 37% of the total revenue of $13.9 billion generated in the quarter.
The dip was attributed to the switch in demand from desktops to low-cost laptops. Dell's mobility business, which includes laptops and PDAs, grew by 14%. It was also blamed on a slow quarter in the UK and in its US consumer business. A weaker net income position - profits fell from $846.0 million to $606 million - stemmed from a one-off $442 million charge related to the cost of replacing faulty capacitors on its OptiPlex desktops.
Dell's CEO, Kevin Rollins, had said in April that he wanted to almost double annual sales from $49 billion to $80 billion within three to four years, but analysts are increasingly sceptical of that goal, despite the company's 36% increase in services revenue.
The uncharacteristically poor quarter at Dell was further emphasised by the relatively strong performance at HP. In its final fiscal quarter of 2005, its Personal Systems Group revenues grew 9% year-on-year to $7.1 billion. Desktop PC sales were up 1%, while laptop business rose 23%.
With the results, the company raised the number of jobs it wants to cut over the next 15 months from 14,500 to 15,300. HP's new CEO, Mark Hurd, said that although he was pleased with HP's progress to date, he was shaping the company up to run a marathon.
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