Enterprise cloud application builder Workday announced third-quarter financial predictions late last night that wildly surpassed Wall Street estimates. Both Oracle and SAP must be watching this company's growth with alarm, particularly because the company just announced Yahoo co-founder Jerry Yang has joined its board.
If you were looking for a cheery start to the earnings season, especially in the current economic climate, then the financial results from Workday fit the bill. Total revenues for the third quarter were $127.9 million, an increase of 76 percent from the same period last year, with subscription revenues of $93.9 million, an increase of 82 percent year-over-year.
Operating loss was $40.4 million, compared to an operating loss of $40.9 million in the same period last year, while net loss per share for the third quarter was $0.27, compared to a net loss per basic $0.67 in the third quarter of fiscal 2013.
However, the real interest in these figures is the relentless growth of a company that could cause Oracle and SAP considerable financial discomfort in the human capital management (HCM) and enterprise resource planning (ERP) software space.
Workday provides both sets of software through the cloud to global enterprises that are working in dynamic and agile work environments. For a long time, this technology space was dominated by Oracle, with Workday, a relative minnow, snapping at their heels.
Workday, however, has been building itself up over the years and slowly built up both its portfolio and reputation over years.
In October 2012, it launched an Initial Public Offering (IPO), which ultimately raised around $ 700 million. Workday said at the time it would use the revenue to expand its market and develop its products.
Since the IPO, that’s pretty much what it has done, actively edging its way into the payroll and HCM spaces of companies that are currently using SAP and Oracle’s own systems but are looking for alternatives. Workday is developing across its entire portfolio said Workday chairman, co-founder and co-CEO, Aneel Bhusri:
We continue to innovate rapidly across all initiatives. In the third quarter, we announced the availability of Workday Big Data Analytics, confirmed that Workday Recruiting is progressing well and on schedule, and we continued our investment in Workday Financial Management, broadening the scope and scale for the world’s largest organizations.”
That in itself will cause problems for Oracle and SAP, but the Yang factor could be even more telling.
Workday and Jerry Yang
For those that don’t know him, Yang was one of the co-founders of Yahoo and a member of the board until last year. In that position, he has had considerable experience building technology products that are used by millions of consumer’s everyday.
Clearly, Workday will be hoping to capitalize on that, but will also be using him to expand its reach into Asia. A statement issued by Workday quoted Bhusri as saying Yang would be a key element in Workday’s long-term strategy:
[Yang’s] appointment comes as Workday continues to build its business for the long term, taking advantage of technology shifts in cloud, mobile, and big data, as it helps global customers transform their businesses for future growth. In many ways Jerry Yang is synonymous with the Internet and the way we engage with it both from a consumer and enterprise perspective and we are fortunate to benefit from that wisdom."
What Yang’s impact on operations will be remains to be seen, but his track record is good and Workday has been growing at an impressive rate even without him. With the fourth quarter well underway and Workday offering sales estimates for this quarter above current analyst’s forecasts, there is a lot to watch here in the coming months.