Rightnow Gets Bookings Blues

Shares hit the skids as promised large deals fail to materialize.
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Reacting to a mixed earnings report, investors pummeled

Rightnow Technologies

(RNOW)

for the second day in a row, knocking 14% off the value of its stock.

Rightnow, which sells customer relationship management software, reported a strong fourth quarter with revenue of $24.6 million, up 34% year over year, and a non-GAAP profit of 9 cents a share. Wall Street was looking for a profit of 4 cents a share on sales of $23.8 million.

But bookings in the quarter, an indicator of new business, were light, and guidance was somewhat below consensus.

Wall Street apparently sensed that the story would not be an entirely happy one. The stock was off sharply before Monday's postclose earnings announcement, and the slide continued Tuesday. In recent trading, shares were off $2.76, or 14.7%, to $15.99, bringing the loss since Friday's close to about 20%.

Bookings were $28.7 million, up 29% year over and down 3% sequentially, which was below expectations of about $31 million to $32 million. The company said it closed fewer large deals in the quarter, and that in turn caused the bookings shortfall.

Earlier in the year, management told analysts to expect strong bookings growth in 2006. "Posting a 29% increase in bookings in the fourth quarter of 2005 after guiding to 40% to 50% booking growth for all of 2006 hurt management's credibility," wrote analyst Patrick Walravens of JMP Securities on Tuesday.

Walravens also was concerned that management didn't explain why it had expected more large deals than actually materialized in the quarter. His company does not have an investment-banking relationship with Rightnow.

Rightnow's business model is fairly complex. Like rival Salesforce.com

(CRM) - Get Report

, it leases business software that runs on its own servers, a service called "on demand." However, it also sells licenses for software in much the same way as rivals such as

Oracle

(ORCL) - Get Report

, and it tends to sell to larger businesses than Salesforce.

With Oracle's acquisition of

Siebel Systems

(SEBL)

expected to close as soon as today, smaller players such as Rightnow and Salesforce will attempt to profit from potential customer confusion and anger as their vendor disappears.

RightNow said it expects first-quarter earnings, excluding stock-option expenses, of a penny to 3 cents per share on revenue ranging from $24 million to $25 million. Analysts were forecasting a 4-cent-profit on sales of $25 million.