SaaS-only providers are still powering ahead as far as top line growth is concerned but at the bottom line they continue to post losses.
NetSuite’s Q4 revenue (period ending December 31 2011) was impressive, coming in 23% up on the previous year at $64.1m and beating estimates of $63.4m. That shows the provider has momentum and that confidence in the cloud continues to grow for complex core business applications such as ERP. The level of growth is a positive sign because ERP has limped way behind CRM in terms of adoption. However, that growth has come at a cost because the company also made a net loss of $7.6m, which was higher than the year ago loss of $6.4m. Looking at the financial detail, it does not look like any particular area of cost has risen disproportionality.
For the full year NetSuite made a loss of $32m vs. a loss of $27.5m the previous year, on revenue that grew 22% to $236m. The results indicate that NetSuite experienced consistent growth over the year, avoiding peaks and troughs, which is testament to the recurring revenue model and NetSuite’s ability to execute in a market that is now readily accepting cloud-based applications.
Elsewhere in SaaS-land, SuccessFactors released Q4 prelims indicating revenue of $97m and an operating loss of $8.3m. Q4 will probably be the last set of SuccessFactors results – we say probably because its $3.4bn acquisition by SAP is being held up because it is waiting on approval from the US Committee on Foreign Investment. There are no adverse signs that we are aware of and SAP is still hopeful of a Q1 close. SAP’s Business Objects acquisition was similarly held up but went through.
Both providers have adopted market and revenue growth strategies but we continue to question the sustainability of this approach and the SaaS-only commercial model. Salesforce.com’s results are due later this month and we can’t see the high cost of growth trend being broken.
There weren’t that many bright spots in today’s Q3 results (to 31st Dec.) for BT Global Services, but a cut in operating losses to £25m, from £35m this time last year and £31m the prior quarter, was indeed one of them.
ERP is a hard market to break into especially in mature markets such as western Europe and the US, but we’re musing over whether a new name will appear. Brazil’s Totvs Solutions seems to have international expansion plans, piggybacking on the international ambitions of its own customers.
Born-again (now) Mahindra Satyam (MSat) seems to be moving in the right direction, at least in Rupee terms. Headline revenues for Q3 (to 31st Dec. 2011) rose by 34% yoy to Rs17.2b, 9% higher qoq. However, when translated to USD, revenues actually declined 2% qoq to $325m. Operating margins were over a point higher than the prior quarter, at 13.9%, but we have to assume that the c.10% depreciation of the Rupee over the quarter more than accounted for the improvement. CEO CP Gurnani reflected on MSat’s ‘healthy progress’ in operational efficiencies, though that doesn’t appear obvious from the few numbers they now disclose.
With quad play telcos an important part of its customer base Amdocs is a beneficiary of the mobile trend ( see 
Mumbai-headquartered Hexaware exited 2011 a quite different – and far more confident – company than it was at the end of 2010. Its formidable 33% growth last year brought headline revenues to $308m. Operating margins were also truly transformed – up nearly 10 points to 16.5%, now at the low end of ‘Tier 1’ players. Even more significant was management’s guidance for 2012 – CEO PR Chandrasekar is looking for at least 20% headline growth, more than double that expected for the India-based offshore services industry. And despite the economic woes in Europe, Hexaware continued to increase its presence, now representimg 28% of revenues (2010: 27%). Indeed the recent $250m deal on our shores (see 
Fourth quarter results from Unisys show the company couldn’t sustain the surprise revenue growth it delivered in Q3. And despite some evidence of progress towards its strategic goals, the outlook for the long-term competitiveness of the company suggests it will continue to find the going tough.
Fujitsu’s latest results point to a tough quarter for the Japanese giant. The company is also revising down its full-year outlook by 50bn yen (£415m at current exchange rates) or 1.1% of total revenues.
Identity management specialist GB Group has had an encouraging third quarter. The three acquisitions that it made last year appear to be integrating well and CEO Richard Law is confident that full year results will be “at least in line with market expectations”. GB Group’s three purchases boosted revenue growth to 20% in the nine months to the end of December taking turnover in the period to £21.2m. Organic revenue growth was a respectable 7% (to £19m). Profitability also appears to be moving in the right direction – operating margins (before exceptional items & share based payments) increased to 11.4% from 6.8%.
We remain mildly in awe of the way that CEO Russell Clements has steered SThree from being a successful pure-play UK ITSA (IT staff agency) into an even more successful international, multi-discipline recruitment company, so doing through good times and bad. And 2011 had a bit of both, with a bright H1 and a difficult H2. Nonetheless, SThree ended the year (to 27th November 2011) with headline revenues 14% higher, at £542m, net fee income (NFI, i.e. gross) margins up almost a point to 36.0%, and operating margins fully a point higher at 5.5%. All organic, by the way.