Bloomberg News

Salesforce.com Competitor SugarCRM Weighs IPO for 2013

November 02, 2012

SugarCRM Inc., which provides customer management software that competes with Salesforce.com Inc. (CRM:US) and Oracle Corp. (ORCL:US), may try to ride the wave of enterprise computing initial public offerings and list as soon as next year, Chief Executive Officer Larry Augustin said.

“Our goal is to be a public company,” Augustin said in an interview, Bloomberg.com reported on its Tech Deals blog. “There’s a chance we can get there in 2013.”

A potential IPO would follow other business computing companies -- including online software maker Workday Inc. (WDAY:US), Splunk Inc. (SPLK:US), ServiceNow Inc. and Palo Alto Networks Inc. that have listed this year. Before testing the IPO waters, Augustin wants to make sure the company reaches the right growth targets and gets a handle on managing its cash.

“We’ll burn some cash this year,” he said.

Cupertino, California-based SugarCRM is growing quickly. Billings, or the amount invoiced to customers, rose 23 percent for the third quarter ending in September from a year earlier, and are up 54 percent over the first nine months of this year, according to the company. It plans to announce those results next week.

SugarCRM has raised a total of $79 million from New Enterprise Associates, Silicon Valley Bank, Draper Fisher Jurvetson and others, including a $33 million round in April.

The company has an unorthodox business model for CRM software, which lets companies’ sales teams track leads and deals. About 800,000 users run a free, open-source version of the product and nearly 200,000 pay for versions that cost $30 to $100 per user each month, Augustin said.

IPO Experience

In addition, SugarCRM’s customers can pick from versions that run on their own computers, in a “private cloud” managed through a partnership with International Business Machines Corp., or an online version hosted by Sugar. The arrangement gives customers flexibility, but costs Sugar more to support than a pure software-as-a-service model, said Augustin.

The company has about 6,000 paying customers, including paint maker Sherwin-Williams Co. and Men’s Wearhouse Inc.

Augustin has been through an IPO run-up before. He took another open-source company, VA Linux Systems Inc., public in 1999. In one of the biggest examples of dot-com froth, the stock soared nearly 700 percent on the first day of trading.

Many Lessons

“There are lots of lessons from that,” Augustin told Bloomberg West in a TV interview slated to air this month. VA’s market capitalization was $12 billion to $15 billion on quarterly sales of $12 million $15 million, he said. “You saw that valuation come down very quickly.”

Underlying performance is more important now, he said.

“What the Workday IPO does is just reinforce that the market is good for enterprise software companies,” Augustin said.

Shares of Workday have soared (WDAY:US) 75 percent since their Oct. 12 debut through yesterday, and traded up 1.7 percent to $49.74 at 9:38 a.m. in New York. Splunk, whose software helps manage IT system performance, has surged (SPLK:US) 68 percent since trading started April 19, and increased less than 1 percent to $28.60.

To contact the reporter on this story: Aaron Ricadela in San Francisco at aricadela@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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Companies Mentioned

  • CRM
    (Salesforce.com Inc)
    • $56.1 USD
    • 0.12
    • 0.21%
  • ORCL
    (Oracle Corp)
    • $40.08 USD
    • -0.05
    • -0.12%
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