RightNow's IPO Marks the Firm's Passage Into Maturity
In the six weeks following Salesforce.com's splashy IPO, the market for technology stocks withered like cut flowers in the summer heat. Several companies planning IPOs, in fact, withdrew their registration papers completely, citing unfavorable market conditions. RightNow ploughed ahead anyway, even though similarly unfavorable conditions stalled the company's first attempt to go public in April 2000.
So, two weeks ago, after pricing at $7, significantly below the $9 to $11 range it had estimated in its registration papers, RightNow went public, and its stock promptly went nowhere, which is where it's sat ever since. (In Wednesday afternoon trading on the Nasdaq exchange, the stock was trading at $7.05.) RightNow was unable to comment, citing quiet-period regulations.
John Ragsdale, vice president and research director for the enterprise applications group at Forrester Research, says he was "surprised the stock didn't rise more than it [has], considering the sort of revenue gain the company has had--something like 20 consecutive quarters of growth.... If they continue on [their current] revenue growth path, future quarterly results should boost the stock."
Ragsdale says that the offering itself is hardly a stroke in the big picture. "The IPO was just something they needed to get past," he says. For RightNow, "it was more about becoming a public company--a mature company--as they expand their product suite, their appeal, and their visibility. This was not about making money for founders, as some IPOs are."
The company's strongest appeal at the moment comes from its "highly referenceable customers [who] love the ease-of-use, specifically the configuration capabilities and ease of upgrade," Ragsdale says. The current competitive landscape, he says, favors RightNow's strong track record. "The focus on best practices is very popular with the customer service crowd. While e-service competitors have hosted versions--eGain, KANA--RightNow still leads the pack with the most expertise in this area," he says, adding that "[RightNow] continues to win business with its low upfront investments and fast implementations."
Ragsdale says he's seen a slight change in RightNow's corporate behavior, "but that is more about bringing in executives from enterprise CRM vendors...than the IPO. RightNow has always been very user-focused, making product decisions based on what existing customers want. As they begin targeting larger deals in new verticals, there will be more market-driven development, and more 'acting like a big company' in customer and public communications."
The long-term future may bring more changes. "As they enter into larger deals with a broader CRM suite, they will likely find longer sales cycles and more competition for deals," Ragsdale says. "The deal sizes will certainly be larger, but the cost of each deal will rise significantly." That, in turn, will put pressure on the company's margins.
At the same time the perception that potential clients have of the company may change now that it's a public entity, Ragsdale says. "There will be more cycles spent in every deal examining financials, since all records are public now. This means RightNow will be compared to larger CRM vendors instead of niche e-service vendors."
The personal touch of RightNow's early years may be sacrificed in the process. "The small-company charm that [CEO] Greg [Gianforte] has fostered will continue at the core of the company, but will likely be less visible in outward dealings," Ragsdale says.
Eventually, as RightNow's new clients begin to outnumber its existing ones, those outward dealings will become the new standard by which the company is judged, and its public face will be increasingly subject to the demands--and scrutiny--of shareholders.
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