Needham & Company on SaaS: 2012...The Year of the Social Enterprise
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Rating Summary:
45 Buy, 19 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 11 | Down: 18 | New: 17
Rating Summary:
45 Buy, 19 Hold, 2 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 11 | Down: 18 | New: 17
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Needham & Company on SaaS: 2012...The Year of the Social Enterprise
Needham analyst, Michael Huang, said, "Despite lingering macroeconomic uncertainty and a host of other issues (European debt crisis, high government deficits, sustained high unemployment, etc.), 2011 turned out to be another banner year for SaaS, highlighted by significant valuation appreciation, strategic M&A, market share gains vs. on-premise peers, a few new public entrants, and new product cycles and expanding market opportunities heading into 2012. One investible theme in 2012 is the rising importance of social enterprise software, spanning internal and external processes, and spanning the gamut of functional areas. A couple of our favorite names well-leveraged to ramping social enterprise demand trends include Salesforce.com (NYSE: CRM) and Constant Contact (Nasdaq: CTCT), both of which we expect to outperform the broader SaaS universe and the S&P 500 throughout next year."
"Despite lingering macroeconomic uncertainty and a host of other issues (European debt crisis, high government deficits, sustained high unemployment, etc.), 2011 turned out to be another banner year for SaaS, highlighted by significant valuation appreciation, strategic M&A, market share gains vs. on-premise peers, a few new public entrants, and new product cycles and expanding market opportunities heading into 2012. While our SaaS coverage stock performances were well off the spectacular bar set in 2010 (up 55% in 2010 vs. up 28% in 2011), they were nevertheless impressive relative to major indices (NASDAQ down 1%, S&P up 1%) and are poised for further appreciation in 2012 and beyond on the strength of secular trends."
"We continue to believe this constrained IT spending environment served as the perfect storm catalyst for SaaS inroads across consumer segments, verticals and product areas. We anticipate SaaS vendors could enjoy deeper customer penetration, market share gains vis-à-vis on-premise peers, and accelerated growth throughout the next year. Encouragingly, we’re seeing more SaaS commitment from large enterprises, which opens the door for larger deals, stronger global system integrator pull-thru, and hopefully reduced churn as a consequence.
"While we’ve always believed that we’d see a number of our innovative, market-share taking, fast-growing recurring revenue SaaS vendors get consolidated into larger enterprise software platforms longer term, we didn’t think that we’d see two of our top SaaS names (RightNow (Nasdaq: RNOW), SuccessFactors (Nasdaq: SFSF)) plus another (DemandTec (Nasdaq: DMAN)(Not/Rated) get consolidated last year—and all within a month of one another."
"Given that deep-pocketed vendors such as Oracle (Nasdaq: ORCL), SAP (NYSE: SAP), and IBM (NYSE: IBM) (all Not/Rated) are just kicking off the game of strategic catch-up to protect their maintenance streams, deepen their SaaS domain expertise, preempt competition, and tap into higher growth market opportunities, SaaS valuation multiples are likely to be propped up absent huge execution missteps.
"One investible theme in 2012 is the rising importance of social enterprise software, spanning internal and external processes, and spanning the gamut of functional areas. Functional areas include customer service/support, sales, marketing, ecommerce, elearning, R&D, and other. Encouragingly, the C-suite at most companies recognizes the need for social strategies, which likely represents a compelling tailwind for a number of vendors."
"A couple of our favorite names well-leveraged to ramping social enterprise demand trends include Salesforce.com and Constant Contact, both of which we expect to outperform the broader SaaS universe and the S&P 500 throughout next year."
Needham analyst, Michael Huang, said, "Despite lingering macroeconomic uncertainty and a host of other issues (European debt crisis, high government deficits, sustained high unemployment, etc.), 2011 turned out to be another banner year for SaaS, highlighted by significant valuation appreciation, strategic M&A, market share gains vs. on-premise peers, a few new public entrants, and new product cycles and expanding market opportunities heading into 2012. One investible theme in 2012 is the rising importance of social enterprise software, spanning internal and external processes, and spanning the gamut of functional areas. A couple of our favorite names well-leveraged to ramping social enterprise demand trends include Salesforce.com (NYSE: CRM) and Constant Contact (Nasdaq: CTCT), both of which we expect to outperform the broader SaaS universe and the S&P 500 throughout next year."
"Despite lingering macroeconomic uncertainty and a host of other issues (European debt crisis, high government deficits, sustained high unemployment, etc.), 2011 turned out to be another banner year for SaaS, highlighted by significant valuation appreciation, strategic M&A, market share gains vs. on-premise peers, a few new public entrants, and new product cycles and expanding market opportunities heading into 2012. While our SaaS coverage stock performances were well off the spectacular bar set in 2010 (up 55% in 2010 vs. up 28% in 2011), they were nevertheless impressive relative to major indices (NASDAQ down 1%, S&P up 1%) and are poised for further appreciation in 2012 and beyond on the strength of secular trends."
"We continue to believe this constrained IT spending environment served as the perfect storm catalyst for SaaS inroads across consumer segments, verticals and product areas. We anticipate SaaS vendors could enjoy deeper customer penetration, market share gains vis-à-vis on-premise peers, and accelerated growth throughout the next year. Encouragingly, we’re seeing more SaaS commitment from large enterprises, which opens the door for larger deals, stronger global system integrator pull-thru, and hopefully reduced churn as a consequence.
"While we’ve always believed that we’d see a number of our innovative, market-share taking, fast-growing recurring revenue SaaS vendors get consolidated into larger enterprise software platforms longer term, we didn’t think that we’d see two of our top SaaS names (RightNow (Nasdaq: RNOW), SuccessFactors (Nasdaq: SFSF)) plus another (DemandTec (Nasdaq: DMAN)(Not/Rated) get consolidated last year—and all within a month of one another."
"Given that deep-pocketed vendors such as Oracle (Nasdaq: ORCL), SAP (NYSE: SAP), and IBM (NYSE: IBM) (all Not/Rated) are just kicking off the game of strategic catch-up to protect their maintenance streams, deepen their SaaS domain expertise, preempt competition, and tap into higher growth market opportunities, SaaS valuation multiples are likely to be propped up absent huge execution missteps.
"One investible theme in 2012 is the rising importance of social enterprise software, spanning internal and external processes, and spanning the gamut of functional areas. Functional areas include customer service/support, sales, marketing, ecommerce, elearning, R&D, and other. Encouragingly, the C-suite at most companies recognizes the need for social strategies, which likely represents a compelling tailwind for a number of vendors."
"A couple of our favorite names well-leveraged to ramping social enterprise demand trends include Salesforce.com and Constant Contact, both of which we expect to outperform the broader SaaS universe and the S&P 500 throughout next year."
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