Jason’s analysis is worth reading in full, but here are two of the key points he brings out:
- The company is losing a staggering amount of money. The company incurred net losses of $32m in 2006 and is on track to loss $50m this year
- 2006 revenues were only $32.5m, significantly lower than I had previously estimated in some market forecasts. They are currently on pace to achieve approximately $65m in revenue this year. As a SaaS vendor, deferred revenue is important. SuccessFactors deferred revenue is currently $56.8m.
Jason has long rated SuccessFactors, and is very even-handed in his reading of the filing. Other good, level coverage comes from Joshua Greenbaum and Phil Wainewright. Tom O’Brien, on the other hand, is pretty unequivocal in his estimation:
Put me down for a short on this one if it ever comes out.
… is about the nicest thing he has to say. Tom has recently moved out of the HR field, so maybe he feels he can just say what’s on his mind.
SystematicHR asked the question What is SuccessFactors doing? just before the IPO announcement, and inadvertently spells out – to my mind – some of the reasons they went to IPO.
With all that credible analysis, is there anything left to say?
Possibly one thing.
Other commentators have mentioned it, but I think the burden of the international aspect is worth some thought. Jason Corsello points out that:
SuccessFactors operates 2 data centers in Europe although the region only accounts for about 3% of revenue.
And Tom O’Brien notes:
In ‘06 and ‘07 SF opened offices in Denmark, the United Kingdom, France, Germany, Australia, Hong Kong, Korea, Italy, and Singapore. These offices (combined) managed to contribute 3.6% of sales.
I applaud SuccessFactors for going at it as aggressively as they have. Still, opening an office in London or Singapore is not just a matter of adding another Tier 1 city to your list. Building an international presence takes time. Making contacts, building a presence, and winning contracts locally … you just can’t rush it.
In the training business, I’ve seen any number of US operations set up in the UK, underestimate the time it takes to build a success, catch a cold and scale back or shut up shop. Nobody likes to be supporting an infant operation while it finds its feet.
With 9 local offices internationally, SuccessFactors has to be carrying a lot of extra cost. They have probably chosen to go to market now because they know the IPO window is closing. With yesterday’s stock market jitters, it may have just closed a little more.