Gloss going off SuccessFactors?
In yesterday's earnings call, Lars Dalgaard, CEO of SuccessFactors reported year over year revenue up 77% yet at the same time confirmed layoffs of 22% in the period. This is being spun as a tactic to stay ahead but is that really the case?
On the face of things, the solid result and forward looking position of a further 30% anticipated growth appear remarkably healthy. Having said that, some of the language used and statements made don't quite match up. How for example you can have 'ongoing quarterly cash profitability' is a new one on me. The company claims it "didn't cut any of its A-list players" but Jason Corsello, fellow Irregular and VP center of excellence at Knowledge Infusion notes (subscription required):
Most notably (although voluntary), Rob Bernshteyn, the former VP of Product Management and Marketing, has left the company. Mr. Bernshteyn was one of the visionaries at the company and responsible for all of SuccessFactors Talent Management Suite.
Jason goes on:
As a result of the cost-cutting initiatives, Knowledge Infusion is hearing for SuccessFactors customers some concerns regarding the quality and timeliness of customer services issues. We view this as a short-term issues as they transfer knowledge and bring new service staff online.
I'm also hearing that despite Dalgaard's assertions and relatively healthy outlook, the company is not winning deals with the ease it once did. Some say this is down to the competition catching up while others believe there isn't enough innovation going into product development.
I was surprised at the level of cutback but one can only assume this is a defensive measure that allowed SuccessFactors to get much closer to break even. As Brian Felt, the company's CFO said in prepared remarks: "We have begun to moderate our spending in favor of reaching our profitability targets sooner and we remain significantly invested in the strategic talent management category we created. As our guidance reflects, we remain cautiously optimistic about 2009 and expect to achieve annual revenue growth and an improved bottom line at the same time."
Jason Wood, another Irregular and one of the smartest investors I know likes to remind us from time to time: "No-one is immune from this recession, even the saas players." That may be true but let's hope it is not at the cost of value delivering innovation.