breaks $1 billion revenue barrier

On-demand software provider earned revenues of $1.08 billion in its last financial year, the company revealed yesterday. That represents a 44% increase on the previous year, a significant milestone in the story of software-as-a-service and an endorsement of the subscription model.

The company withstood the economic calamity of the tail end of 2008 well – revenues for its final quarter of the financial year, ending 31 January 2009, were $290 million, up 33% from the same quarter the previous year.

However, the company does anticipate some impairment as a result of the recession, and downgraded its predicted revenues for the coming year from around $1.55 billion to around $1.33 billion. "There’s increasing uncertainty out there,” CFO Graham Smith told investment analysts.

Profitability is on the rise at Net income for the most recent quarter was $13.8 million, nearly twice the figure earned in the last quarter of the previous year.

But that remains a comparatively small margin for the software industry. Earlier this month, for example, security vendor Verisign reported net income of $39 million on quarterly revenues of $240 million, while data integration vendor Informatica earned net income of $19.9 million on revenues of just $124 million in its most recent quarter.

Larry Ellison, Oracle CEO and investor, famously derided the profitability of the SaaS model last year, saying “If you look at the [SaaS] leader,, they don’t make very much money and they’ve been at it for almost ten years”.

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media plc from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The Economist Intelligence...

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