Sobs for Saba

As the hot public offerings from the likes of athenahealth (Nasdaq: ATHN  ) and Constant Contact (Nasdaq: CTCT  ) indicate, Wall Street loves Web-based on-demand software. Now, even traditional software players are moving into the on-demand realm. Saba (Nasdaq: SABA  ) is one of them. But it's not having an easy time. According to its fiscal-first-quarter report late last week, revenues came in at $25.5 million, up 10% from the same period a year ago, but it also suffered a net loss of $2.4 million, or $0.08 per share.

Saba develops software to help improve employee productivity and education, and its client list includes such big names as Dell (Nasdaq: DELL  ) and Home Depot (NYSE: HD  ) . Right now, it's feeling the pain of transitioning to subscription revenue: License revenues plunged 24% to $4.7 million.

Keep in mind that Saba wants to pursue both traditional software solutions and on-demand ones. That might cause complications and confusion, because traversing both routes will necessitate managing different code bases and business models. And for a small company -- Saba has only about $11.8 million in the bank -- it could also mean a drain on precious resources.  

So even though the Street seems to love the on-demand trend, it sees the potential for problems here. Despite the recent tech rally, Saba's stock has fallen by more than 20% since May, and it's unclear when the company will make a turnaround. On the earnings conference call, management indicated that the recovery could take "three to four years." If so, it's probably best to pass on this stock for now.

For more Foolishness:


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 538144, ~/Articles/ArticleHandler.aspx, 7/26/2014 11:45:30 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement