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Saba's Slow Sailing

In late June, shares of Saba Software (Nasdaq: SABA  ) , an enterprise software company, plunged more than 20% to $5.50 per share. The company posted disappointing quarterly results, and the stock price has been lackluster since then, despite a tech rally. Unfortunately, with the latest quarterly results, Saba's stock price is probably going to continue to be weak.

In the third quarter, revenues increased by 70% to $23.2 million -- but keep in mind that Saba got that big boost from its acquisition of Centra Software. However, increased licensing revenue is always a positive sign for software companies, and it also presents cross-sale opportunities. In the third quarter, license revenues increased 85% to $6.2 million, and some of the new customer contracts included those with Dell (Nasdaq: DELL  ) , IBM (NYSE: IBM  ) , and Intel (Nasdaq: INTC  ) .

However, there was still a net loss of $2.6 million, or $0.09 per share, which compares to a net loss of $1.6 million, also $0.09 per share, in the same period a year ago. As for the next quarter, management projects revenues of $24 million to $25 million and a loss between $0.04 and $0.07 per share.

Founded in 1997, Saba develops human capital management (HCM) software, which helps companies improve employee productivity and education. Some of the features include online training, employee performance tracking and evaluation, and even succession planning (that is, planning for when key employees leave).

Despite recent results, the long-term potential for Saba does look bright. The aging population, outsourcing, and globalization will provide more reasons for companies to think about HCM solutions. Moreover, some standout companies - such as Starbucks (Nasdaq: SBUX  ) -- have shown the benefits of effective HCM.

But Saba is still going through the typical issues of integrating a major acquisition. In other words, there is no need to rush into this stock. Still, going into next year, it's one to keep an eye on.

For further Foolishness:

Dell and Starbucks areStock Advisorselections.Dell and Intel areInside Valuepicks.

Fool contributor Tom Taulli does not own shares mentioned in this article. The Fool has a disclosure policy.

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