ServiceNow Revenue growth analysis

ServiceNow has announced its Q2 2012 revenue growth in Aug. They showed 93%growth y-o-y and 20% q-o-q. They did 57 M in Q2.

They are expecting 61 M - 63 M in Q3 which is around 90%+ growth y-o-y. This year they will be doing around 230M. The growth is very high.

This year they conducted user conference and there were 2000 participants. This is double of last year. There is a big growth in their revenue. At the same time their spending is drastically increasing.

Compared to last year second quarter, they have doubled their spending. Last year their spending on sales and marketing was around 15 M and this year it is 33 M. In addition their net income has become negative.

They have gone public this year. The biggest advantage for them is this. When you become public, you have to see the growth rate mainly. The net income is going to be secondary for public listed companies.

Once they show the growth, the company value get increased. This is the major difference between a privately held company and a public listed company.

Saravanan

Solarwinds announced Q2 2012 results

Solarwinds released their Q2 results. They have grown 40% in total revenue and 43% growth in net income year over year. Their Q-o-Q growth is 7% in total revenue and 13% in net income.

Their selling cost has gone up only by 36% y-o-y and 3.8% q-o-q. This is also a great sign for their spending control.

They have done one more acquisition now. They acquired  webhelpdesk.com a help desk company (installable) for $20M. They are increasing their breadth of IT products by acquisition. They have acquired Seven companies in the last couple of years.

1. webhelpdesk.com - July 2012 - Help Desk - $20M
2. Eminentware   -  Feb 2012 - Patch Management - $ M
3. Dameware - Dec. 2011  -  Remote control tools - $40M
4. DNSstuff.com - Dec 2011 - DNS Management - $11M
5. TriGeo - July 2011 - Log Management - $35M
6. Hyper9 - Jan 2011 - Virtualization - $23M
7. Tek Tools - Jan 2010 - Storage Management -  $42M

I was expecting SWI will acquire a help desk company in Q1 2012, but it happend now in early Q3.

http://vpsaran.blogspot.in/2012/01/solarwinds-acquicition-continues.html

Solarwinds was expecting a revenue of around $245M - $255M, a 24% - 29% growth in 2012. The present growth rate shows they will be doing between $265M and $270M which is more than 33% growth. Their strategy of acquire and grow works very well.

Solarwinds CEO Kevin Thompson said that "SolarWinds feels comfortable with an acquisition a quarter".

Now they have few more areas where they can invest - Customer Support, Project Management and CRM. Soon they will move from IT to collaborative business applications.

One big draw back they have is that they are not investing on the cloud applications. They may miss that market now. As their approach is acquire and grow, it is very easy for them to acquire cloud companies and establish them self on cloud any time. Now cloud business is started growing, they will get good established companies when it matures. Then their growth rate will be fast and good.

Saravanan

Google Q2 2012 report - a Review

Google has announced its Q2 results $12.2 billion. It is 35% growth y-o-y and 15% growth compared to Q1 2012.

The major revenue contribution is from Advertising and other category (90%). Also the growth rate is high in non-us region (53%).

The employee count has increased from 33k last year to 55k. The increase is due to the motorola acquisition. 23k  employees were moved under Google from Motorola. 1000 employees were recruited by Google directly in Q2 2012 alone.

The Cost-Per-Click has gone down by 16% in Q2 2012 compared to Q1 2012. But this has gone up by 1% compared to Q1 2012.

The growth differentiator is the revenue from Motorola. Otherwise the revenue growth is same trend of previous quarters. The standalone growth is 21%.

Google registers consistent increase in revenue from non-US region. The Europe region growth was limited due to the economic turmoil in Countries like Spain, Greece, Italy. UK had a growth of 20% y-o-y.

Why Companies are Acquiring Social Media Start-ups

Recent days, acquisition of social media start-ups by the public listed companies are increasing. This trend started early 2012.

Microsoft is acquiring the social media company "Yammer" that has tool for the easy collaboration among employees and increase the productivity.  This is one of the biggest acquisitions in social media start-ups. Microsoft pays around $1 billion as it is looking for a major change to come out of its stagnation.

Facebook acquires Instagram a photo sharing mobile app company for around $1 billion is cash and shares.

Salesforce.com acquires Buddy media a social marketing company that has facility to publish content, provide marketing Ads and measure the effectiveness of its marketing activities. This acquisition also involves major money i.e. around $700 millions.

Oracle has acquired Virtue a social marketing company for $300M. 

How are these social media acquisition helps the companies? Will it improve their business or this is also one kind of .com bubble?

Today, the social media sites are getting more users and very frequent visitors. After the gaming sites, these sites are getting more traction from all groups/ages. So users are familiar with the usage. By bringing in similar approach in the business apps and bringing in the collaboration as a part of the business applications, the productivity will be increased. Also the traditional marketing is not bringing enough business and conversion tracking is an issue, by moving to social media these difficulties are eliminated. 

Why do companies going for acquisition instead of using their services? Is it adding value to these companies?

As the CRM, Social Media and Marketing getting more traction, all the businesses wants social media marketing and monitoring the marketing activities. If the business applications like salesforce.com etc. integrates their services with the social marketing and monitoring tools, the value addition to their customers will increase and the growth of their customers will increase. This will be one more marketing value addition they can propose.

We have to wait and watch how this strategy works for these companies. 

Saravanan

Apple starts 2012 with big Q1 Growth

Apple announced financial results for its first quarter of the fiscal year 2012, ended December 31,2011. The company reported a record net profit of $13.06 billion, a major increase compared to last quarter’s profits of $6.62 billion, but a growth of 117.6% compared to profits of $6 billion, in the year-ago quarter.

The company’s quarterly revenue rose to $46.33 billion in the quarter, an increase of 73.26% compared to $26.74 billion that it reported in the same quarter, last year. International sales accounted for 58 percent of the quarter’s revenue.

The results include an additional 14th week that Apple added to the quarter

• iPhones:  37.04 million sold during the quarter, up 128% year on year. Previous quarter, Apple had sold 17.07 million iPhone
• iPads:  15.43 million  sold during the quarter, a 111% increase year on year. Last quarter, Apple had sold 11.12 million iPads.
• iPods:  15.4 million sold during the quarter, down 21% year on year. 6.62 million iPods were sold in the last quarter. - Macs: 5.2 million sold during the quarter, a 26% unit increase over the year-ago quarter. This is an improvement over the previous quarter, when Apple had sold 4.89 million Macs
• Gross margin was 44.7 percent compared to 38.5 percent in the year-ago quarter.

The company CEO Tim Cook said, the revenue growth in India has gone up three times. 

Though some industry watchers had predicted that Amazon's Kindle Fire, which came out in November, would affect sales of the iPad, Apple executives said there had been no "obvious effect" of the device on sales of its own tablet.

 Some points on this quarter report

• Apple has paid $4 billion to the app developers. In the last quarter alone they paid $700 million to the developers.
• Apple Cloud service iCloud has 80 million customers
• The company has $97.6 billion in cash at end of December, compared to $81.6 billion at end of the last quarter, an increase in $16 billion.

Solarwinds' Acquicition Continues

Solarwinds continuing its strategy of acquiring and growing continues. In Dec 2011, they acquire DameWare Development for $40 M in cash.

This acquisitions makes them to add their product line to serve the system administrator to remotely manage their systems. They are able to succeed by acquisitions. This is one of the major strategies for Solarwinds and they are growing tremendously.

In future they will target the companies that has products in the following domain

1. Helpdesk / Service Desk
2. Customer Management Software
3. Project Management Software

One thing that surprise everyone is they have not yet entered into the Cloud market. May be that will be their main strategy for 2012!!!!!

Merchants with High Level Fraud Transaction

Doing credit card transaction in any website is a major challenge. The servers are to be secured and the applications are to be PCI compliant. Over and above we have to have proper fraud transaction checks.

If we miss a little, hackers will use the phished credit cards to do the transaction in our website. The card owner will not know that his credit card is compromised until he see his bill. Once he see that there were fraud transaction, he will go for charge back. This is where the merchant's head ache starts. He has to defend but there are limits in the number of fraud transactions.

Master card will allow max of 50 charge backs and Visa card will allow 100 transactions a month. if it crosses that then the % of fraud transaction will be checked by the Mater Card. If it exceeds 1% then the merchant will be entered into a watch list.

The Credit Card Associations of Visa and MasterCard maintain the Global Merchant Audit Program (GMAP) to monitor merchants processing an excessive number of fraudulent transactions. GMAP is a rolling six-month database that identifies merchants that for any one calendar month have:

• At least three fraudulent transactions.
• A cumulative total of at least $2,000 in fraudulent transactions.
• A minimum fraud-to-sales volume ratio of 1%.

Merchants identified under the GMAP program are divided into the following three tiers based on their fraud-to-sales volume ratio in any one month:

• Tier 1 – fraud-to-sales volume ratio minimum of 1% and not exceeding 3.99%.
• Tier 2 – fraud-to-sales volume ratio minimum of 4% and not exceeding 6.99%.
• Tier 3 – fraud-to-sales volume ratio of at least 7%.

If a merchant is identified in Tiers 1 or 2 more than one time in a 12-month period, it will be automatically escalates into the next higher tier. If a merchant is escalated into Tier 2, the processor is required to provide it with additional training on fraud control. If a merchant is escalated into Tier 3, the processor is required to decide whether to accept liability for fraud related chargebacks or to terminate the merchant account.

If a merchant is identified in any one of these tiers, it should expect certain actions from its processor. Some of these actions are required by Visa and MasterCard, for others the processor will follow its own policies.

• Tier 1 merchants. When a processor is notified that one of its merchants is placed into Tier 1, there is no requirement that the processor respond formally to the notice. A Tier 1 notice is provided for information only. The merchant should expect, however, that the processor will implement a fraud control program or enhance an existing one.
• Tier 2 merchants. When a processor is notified that one of its merchants is placed into Tier 2, it is required to conduct training on credit card acceptance and fraud control procedures at the merchant location. The Credit Card Associations (Visa and MasterCard) do not require processors to terminate the merchant account, although the processor can do it, if that is its policy. The more likely scenario is that the processor will implement a rigorous fraud control program.
• Tier 3 merchants. When a processor is notified that one of its merchants is placed into Tier 3, the Associations require that it must either terminate the merchant account or accept liability for chargebacks for all reported fraudulent transactions (except fraudulent application and account takeover fraud) during the applicable chargeback period. The chargeback period will be determined to be a minimum of six months or a maximum of 12 months. Most likely, the processor will terminate the merchant account.