Maybe spending the better part of 13 years as a PR consultant has left me jaded, but it's language like this that makes me want to short the beejeezus out of SuccessFactors (Nasdaq: SFSF ) . Pardon the length:
"Despite very strong compares, SuccessFactors delivered strong growth in Q1, while hiring aggressively for future growth and customer investment," said Lars Dalgaard, founder and CEO of SuccessFactors. "SuccessFactors leads the very large market that we created in BizX cloud-computing. We continue to win market share while simultaneously expanding our total available market through new innovations and acquisitions. By acquiring Plateau Systems Ltd., which was eagerly requested by our sales reps and many customers, we will add learning to SuccessFactors' scalable and secure platform and further expand our total available market. Plateau Systems Ltd. brings us a spectacular group of enterprise customers with one of the highest renewal rates in the industry at approximately 99%. By combining Plateau's products with our Jambok social mobile video learning acquisition, we will be able to provide customers a truly unique offering, further solidifying SuccessFactors' position as an innovator.
Strong! Large! Expanding! Innovations! Acquisitions! Eagerly Requested! Secure! Unique! Dalgaard's PR team hugs superlatives like a crying infant clinging to her mom.
Were we to run this through my unique, not-really patent pending superlatives-to-substance ratio, or the SUP-to-SUB ("Soup to sub," for those of you scoring at home), we'd have to score SuccessFactors as the stock equivalent of an empty suit.
We wouldn't be the first. Shares of this so-called BizX innovator (read: supplier of online talent management software) sold off more than 10% yesterday when the company failed to beat Wall Street's estimates for second-quarter profit, Reuters reports.
Ordinarily, I'd call that folly. But SuccessFactors' numbers offer little to get excited about. Overall revenue soared 52%, but deferred revenue improved just 24%. Deferred receipts were up 26% last year at this time.
Deferreds are critical for a subscription business like SuccessFactors and peers NetSuite (NYSE: N ) , Taleo (Nasdaq: TLEO ) , and salesforce.com (NYSE: CRM ) . The higher the growth, the more cash these companies collect for their online services. SuccessFactors' cash from operations fell in the first quarter, from $13.1 million last year to $10.4 million this year.
So while I'm convinced the cloud rally isn't over, there's a line forming. On one side are the real Rule Breakers: fast-growing first movers such as salesforce.com. On the other side are second-movers such as NetSuite and the hype-hungry hangers-on that lag behind it -- hangers-on like SuccessFactors.
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