Tag Archives: crm

ServiceNow May Settle Some Patent Litigation With BMC Software

ServiceNow ( NOW ) stock rose Tuesday, with word out that it might be able to settle some of its patent litigation with privately held BMC Software, avoiding a trial scheduled to start Friday. A cloud-based business software rival of SAP ( SAP ) and Salesforce.com ( CRM ), ServiceNow shares were up more than 4% in afternoon trading in the stock market today , near 60.70. William Blair analyst Justin Furby suggested the possible settlement may “be a mild positive, as the prospect of a jury trial and the potential appeals process … would have likely created overhang on the stock. “More importantly, until this point, we believe the litigation has not affected ServiceNow’s sales cycles,” Furby wrote in a research note Tuesday. But the increased public attention of a trial “could have delayed sales for SerivceNow, particularly if the court would have ruled in BMC’s favor. “Lastly, BMC had sought injunctive relief, and had the lawsuit and subsequent appeals process gone against ServiceNow, it could have faced the prospect of discontinuing or rewriting certain of its applications,” Furby said. BMC sued ServiceNow in September 2014, claiming seven patent violations. Courts dismissed two claims, and BMC withdrew a third. But last month, BMC filed a second lawsuit against ServiceNow, claiming infringement of five patents, two of which were included in the original litigation, Furby said, adding that he didn’t know if the proposed settlement included this second case. He said he spoke with someone at ServiceNow who told him that “all matters in controversy between the parties have been settled, in principle.” ServiceNow did not immediately respond to IBD’s request for comment. The four remaining claims of the original lawsuit involve “managing a computer network via hierarchy,” collecting performance management data, determining the root cause of a problem, and “spotlight visualization” for IT service models, Furby noted. Hewlett Packard Also Suing ServiceNow As for separate litigation filed against ServiceNow in February 2014 by the former Hewlett-Packard Co. — now represented in the action by  Hewlett Packard Enterprise ( HPE ) — claiming eight patent infringements, the court threw out four claims, stayed litigation on two, and scheduled an April 29 hearing and a May 22, 2017, trial date for the remaining two claims, Furby said. “The BMC settlement has yet to be finalized, and we are unclear what the amount will be and whether ServiceNow will be paying ongoing licensing fees to BMC as part of a potential settlement,” Furby wrote. ServiceNow has not been accruing reserves for damages but has been “expensing significant ongoing attorney fees … incorporated into guidance,” he said. Furby put the company’s net cash pile at about $700 million and estimated $325 million in free cash flow in 2016 prior to any settlement. ServiceNow stock is trading 34% off a record high 91.28 set Dec. 4. Its stock plunged 15.7% on Jan. 28 after reporting billings below expectations, although fourth-quarter non-GAAP EPS was up 533% to 19 cents, doubling analysts’ consensus, and revenue was up 44% to $285.6 million, also topping Wall Street. The IBD Computer Software-Enterprise industry group, led by SAP and Salesforce.com, has fallen 18% from its November highs. With $91.9 billion in market cap, SAP leads the group, followed by Salesforce’s $46.8 billion market value. ServiceNow’s market cap stands at $9.6 billion. Shares of SAP and  Salesforce were up a fraction Tuesday afternoon, but Hewlett Packard Enterprise stock was down 2.5%.

Software Bounce? Rebound? Workday Leads, But Price Targets Fall

Are long-lagging software stocks ready to rebound? With the major stock market indexes rallying about 2%, even Tableau Software ( DATA ) was up 4% by early afternoon Tuesday. But the real mover is enterprise software developer Workday ( WDAY ), back to work after an anxious Leap Year workday when it unveiled Q4 earnings and revenue that beat Wall Street — for the 13th time in 14 quarters — but then sucked some oxygen out of the room by guiding the current Q1 sales below analyst estimates. The stock edged down in after-hours trade Monday. No matter. Workday stock gapped up 9.1% after the morning bell, then slipped slightly, then rebounded to sit 9.8% higher at 66.40 in midafternoon trading in the stock market today , heading for a fifth straight up day, its ninth in the last 11. Workday stock is still 29% off a three-month high made last May. The entire IBD Computer Software-Enterprise industry group was up 2.3% by midafternoon, also on a five-day win run, boosted by Salesforce.com ‘s ( CRM ) big 11% jump after issuing solid earnings and outlook after the close Feb 24. Salesforce was up 2.3% in afternoon trade Tuesday, while legacy software king Oracle ( ORCL ) was up 2.9% to 37.85. Salesforce is the highest-ranked of the bunch, with an IBD Composite Rating of 88 out of a possible 99, tracking metrics such as earnings growth, stock market performance and other measures. But the Computer Software-Enterprise industry group as a whole ranks just 90th in performance out of 197 tracked by IBD. The Computer Software-Database group, where low-rated Tableau resides, ranks near the bottom, at 184, though both groups have been on an upswing since the second week of February, clambering back from steep losses the prior week. Oracle, Tableau and Workday still hold relatively low IBD Composite Ratings in the 40s. A little momentum at Workday? Analysts differ. They’re impressed, but also cautious. Citing Workday’s “strong billings” — up 44% — with financial management software customers “roughly doubling” year over year to 207 clients, FBN Securities analyst Shebly Seyrafi lowered his price target to 75 from 80 and retained his sector perform rating on Workday, not so much on any weakness at Workday but “due to recent market multiple contraction.” And while revenue guidance for Q1 came in below analyst expectations , “billings guidance was above,” Seyrafi wrote in a research note issued Tuesday. “We are also impressed by WDAY’s strong degree of visibility,” he said. Unearned revenue of $900 million grew by 42%, but noncancelable backlog — not on the balance sheet — grew by 62% to $1.56 billion, he noted. “This results in the combination of unearned revenue and backlog at $2.5 billion, up 54%. Since this represents 82% of our estimated next-eight-quarter subscription revenue, up from 72% at the end of fiscal 2015, WDAY’s visibility has increased.” Similarly, analyst David Hynes lowered Canaccord Genuity’s price target to 75 from 95 but reiterated a buy rating for Workday. “Lots of things happening at Workday,” he wrote in a research note, citing “record new customer adds, Fortune 500 go-lives, triple-digit pipeline growth, improving competitive win rates, increasing attach rates, new SKUs set to hit the market in (the current) fiscal 2017, and the list goes on.” Those new SKUs — stock keeping units, or individual products — in planning, learning management and student software are expected to add “more than” a $5 billion total addressable market for Workday to work over, co-founder and CEO Aneel Bhusri told analysts in a post-earnings conference call late Monday. That’s on top of Workday’s core financial management and human capital management (HCM) software product markets. Then again, Brean Capital analyst Yun Kim warned that billings growth decelerated to 42% in fiscal 2016 from 69% in 2015. “Its fiscal 2017 billings guidance calls for modest 31% growth,” Kim wrote in a research note issued Tuesday. “While overall FY17 revenue and billings guidance was mostly positive, we believe its outlook for flat margins could disappoint some investors,” Kim said. Brean Capital rates Workday a hold with a 60.45 price target. “Overall, given lack of transparency into its new business bookings, we believe there will likely be a high degree of uncertainty that exists among investors regarding its true sales momentum,” Kim wrote. Evercore ISI analyst Kirk Materne lowered his price target to 75 from 95 but maintained a buy rating. “Overall, we believe the longer-term trends in the business remain positive, and WDAY remains one of the best multiyear growth stories in software,” he said in a Tuesday research note. “But given that the market remains wary of high valuation SaaS  (Software as a Service) names, investors will need to take a long-term view.” For the current Q1 2017, Workday guided revenue below analysts’ views to a range of $337 million to $339 million but didn’t forecast earnings. Analysts polled by Thomson Reuters expect on average a Q1 per-share loss minus items of 2 cents, flat with a year ago, on $343.3 million in revenue vs. Q1 2016’s $251 million.

Workday Beats For 13th Time In 14 Quarters, But Outlook Short

All in a Leap Year workday’s work, Workday ( WDAY ) late Monday issued its fiscal fourth-quarter earnings that beat Wall Street views, but its Q1 revenue outlook missed forecasts and shares were down in after-hours trading. The company’s CEO, however, said Workday will expand its total addressable market. And the Q4 ended Jan. 31 marked the 13th time in 14 quarters that Workday beat consensus on earnings and revenue since going public in Oct. 2012, priced at 28. But CFO Mark Peek forecast Q1 revenue of $337 million to $339 million, up 35% at the midpoint but below the $343.3 million modeled by analysts polled by Thomson Reuters. Workday stock was down 3% in after-hours trading, after the company released its results. Shares  rose 1.7% to 60.46 in Monday’s regular session. Workday stock hit a 39-month low at 47.32 on Feb. 9. The stock climbed over the past two weeks but is still down 24%  this year. Investors in software stocks, battered in recent months, had hoped Workday might encourage upward movement in the sector like Salesforce.com ( CRM ) did last week when its stock jumped 11% after its fiscal Q4 earnings and its outlook beat expectations. The enterprise software sector dived Feb. 5 after Big Data developer Tableau Software ( DATA ) issue a disappointing Q4 and gave soft guidance. Tableau crashed 49.5% that day to 41.33 and still has not recovered. “We ended FY16 on a high note with a very strong fourth quarter across product lines and around the world,” Workday CEO Aneel Bhusri said in the earnings release. “Demand for our financial management and HCM (human capital management) products continues to rise, as do our competitive win rates. The year ahead brings us an expanded addressable market with the delivery of Planning, Learning Management and Student applications that allow customers to drive employee engagement and productivity in new and transformative ways.” Big legacy software developer Oracle ( ORCL ) unwittingly might be helping Workday by somewhat reducing its automatic promotional Software as a Service to customers,  D.A. Davidson analyst Jack Andrews wrote in a research note before Workday’s earnings release. Workday’s  helps companies manage their most important assets: people, in the form of the HCM applications, and money, with financial management software. The company posted a per-share loss minus items of a penny in Q4, better than its 6-cent loss in the year-earlier quarter, on revenue of $323.4 million, up 43%. Workday had guided Q4 to revenue of $317 million to $320 million. Analysts polled by Thomson Reuters had modeled $320.3 million when Q3 results were reported in November, but then revised it down to $319.6 million. Analysts had expected an adjusted loss per share of 5 cents.