Wall St cools on leading on-demand vendors

Stock prices of several leading on-demand public companies have been hammered this week on disappointment with earnings and outlook.
Written by Phil Wainewright, Contributor on

It's not been a joyful week for investors who believe in the on-demand model. Yesterday saw one stock tumble more than 25% in the first hours of trading, while earlier this week another slid 20% in two days. Meanwhile, that 8.5% drop in Google's stock price (as of last night's close) has also kept investors' nerves jangling.

Disappointment with earnings is cited as the reason for each of these slips.The leading lights of on-demand CRM weren't faring well on Wall St Yesterday WebSideStory (ticker:WSSI) published final quarter numbers that were marginally weaker than expected, along with a lower-than-expected outlook for the first quarter. A nervous market sent the share price plummeting at the open, before it recovered some to close 15% down on the day. The results bring WebSideStory's trailing twelve months (TTM) revenues to $39.4 million, up 15% on last quarter's TTM of $34.2 million, and up 74% on a year ago.

The company also revealed a $57.3 million deal to buy Visual Sciences, a privately-held company specializing in high-end streaming data analysis and visualization software. Like its new parent, Visual Sciences is an on-demand provider.

As well as extending WebSideStory's real-time data visualization technology, the acquisition will help it add feeds from inside the enterprise — from call centers, email, point-of-sale and branch transactions — alongside its core web analytics. That will help it against competitors such as privately-owned Overture, and also aligns its API-driven digital marketing application more closely with CRM — so perhaps a merger or acquisition now beckons with one of the on-demand CRM leaders.

Neither of the leading lights of on-demand CRM were faring that well on Wall St themselves. RightNow Technologies stock (ticker: RNOW) was hammered earlier in the week despite exceeding analyst expectations in its 4th quarter. What disappointed Wall St was a more cautious outlook than expected, along with a small slowdown in new contract signings. The stock price plunged 20% in two days, and hasn't yet managed to recover. RightNow's new TTM is $87.1 million, just 9% up on last quarter and 41% up on a year ago.

Meanwhile, Salesforce.com's stock (ticker:CRM) — having hit an all-time high of $42.99 on Monday — has spent the rest of the week getting knocked by jitters about its outage difficulties. It closed last night 7.5% down on Monday's close and has opened lower again today. Salesforce.com's fiscal year ended on Tuesday so it won't be reporting for a few weeks yet. Wall St will be watching closely when it does.

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