Bloomberg News

Taleo Plunges as Billings May Fall Short: San Francisco Mover

January 23, 2012

Jan. 20 (Bloomberg) -- Taleo Corp., a maker of software for helping manage employees, dropped 7 percent on concern that the company’s billings fell to their weakest levels in more than a year during the fourth quarter.

The shares declined $2.68 to $35.43, the biggest one-day drop since Dec. 21. Dublin, California-based Taleo, which has more than 5,000 customers in 187 countries, had climbed almost 40 percent last year.

“Our field checks suggest the pace of business may have weakened in the fourth quarter as one segment of the market, the recruitment sector, has softened quite a bit at the edges,” Brian Schwartz, an analyst at ThinkEquity Partners LLC in San Francisco, said in an interview.

“Macro concerns coming out of Europe, a negative currency impact from a strengthening dollar, means the company is facing a very challenging comparison from its previous fourth quarter,” Schwartz said. “It’s the double whammy of the macro situation and buyers becoming more cautious that could result in billings growth that could be half of what it was the previous fourth quarter.”

Taleo makes Internet-based software that lets customers recruit employees, assess worker performance and determine pay levels. Since its initial public offering in 2005, Taleo bought companies to add customers and acquire technologies that were incorporated into its software.

Subscription Slowdown

ThinkEquity lowered its 2012 cash flow estimate for Taleo to below consensus levels and maintains a hold rating. Taleo, while a “solid franchise,” may be facing “the slowest subscription billing growth in the past four quarters,” Schwartz said.

Billings are “the key leading indicator for the business,” he said.

Ally Zwahlen, a Taleo spokeswoman, declined to comment on the stock moves and any speculation on billings. Its earnings will be announced Feb. 14.

Taleo competes with companies such as SuccessFactors Inc., which is being acquired by SAP AG for $3.4 billion in cash. SuccessFactors, a maker of software used to manage employee performance, has more than 3,500 customers in 168 countries.

The acquisition prompted speculation about Taleo as a possible takeover target. The company’s chief executive officer, Mike Gregoire, said in December the company intends to remain independent.

“Taleo is a great takeout candidate and I’d be using the weakness as a great buying opportunity,” said Brendan Barnicle, an analyst at Pacific Crest Securities in Portland, Oregon. He rates Taleo as outperform.

“There may be some confusion in how they are handling their accounting which is adding to the weakness today,” Barnicle said. “They’d be a natural add to Oracle, where they would add expertise in learning and in talent management.”

--With assistance from Aaron Ricadela in San Francisco. Editors: Jeffrey Taylor, Nick Turner

To contact the reporter on this story: Samantha Zee in San Francisco at szee@bloomberg.net

To contact the editor responsible for this story: Jeffery Taylor at jtaylor48@bloomberg.net


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