Taleo Takes Off

Software developer Taleo's (Nasdaq: TLEO  ) shares have surged a tidy 66% over the past six months. The company is proving that its growth is sustainable, and it should gain an additional boost from upcoming product launches.

Taleo develops software to help companies with managing resumes, employee screening, and performance management. Its Web-based products can easily scale to meet the needs of everyone from small firms to titans like Citigroup (NYSE: C  ) and Dell (Nasdaq: DELL  ) .

For the Q1 results reported on Monday, Taleo increased revenue 29.6% to $28.7 million, and posted net income of $908,000, or $0.03 per share. This compares to a loss of $594,000, or $0.03 per share, in the year-ago period.

The company continued to rack up customers, gaining 14 new enterprise customers and 140 new small and medium-sized clients. Taleo seems to be benefiting from distribution partners such as IBM (NYSE: IBM  ) and Accenture (NYSE: ACN  ) .

In early March, Taleo purchased the assets of JobFlash, which helps companies schedule interviews with non-English-speaking job recruits, for $3 million. The deal gained Taleo 60 new customers, along with new features such as multilingual telephone services.

Taleo's in-house R&D is formidable, too, giving the company a healthy pipeline of new products for 2007. It plans to launch its Taleo 7.5 software, as well as a performance management product. The company's growing customer base should provide some favorable leverage for these new offerings.

Taleo issued upbeat guidance of $30 million to $30.5 million in revenue for Q2, and earnings of $0.09 per share. The company trades for a reasonable 2.9 times revenue, and as other Web-based players like Salesforce.com have shown, companies in this space with consistently strong growth can offer savvy investors considerable upside.

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Fool contributor Tom Taulli, author of The Complete M&A Handbook, does not own shares mentioned in this article. He is currently ranked 1,610 out of 28,402 in CAPS. The Fool has a disclosure policy.


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