Today: Marin Software pulls off Silicon Valley's second successful software IPO of the week, showing Wall Street's continuing appetite for software as a service. Also: Yahoo (YHOO), HP and Apple (AAPL) lead tech higher as stocks end the week on an upswing.
Silicon Valley's latest IPOs have an old-school flavor
Silicon Valley's performance on Wall Street in the past two years has been unpredictable, to say the least, with tech giants like Apple running hot and cold while initial public offerings are welcome one minute, shoved away the next. There has been a constant in that time, however, and two IPOs this week show that it has not changed: Everyone loves enterprise software, if it can manage the cloud.
Marin Software found enough demand for its shares that it increased the size of its offering at the last minute, while pricing the IPO $1 higher than its expected maximum to bring in more than $100 million. If that sentence sounds familiar, its because you could replace "Marin Software" with "Model N" to have an absolutely true statement about this week's earlier IPO, giving Silicon Valley two successful debuts in
With the success of Netsuite and Salesforce, other cloud-based enterprise software companies have found success on Wall Street recently, including Pleasanton human-resources company Workday, San Diego's ServiceNow and a host of smaller companies. That success is continuing in another generation of Silicon Valley cloud IPOs, Marin Software founder and CEO Chris Lien said Friday.
"Netsuite, Salesforce, Workday, those next-generation software leaders have all been well-received by investors, so there was good interest throughout," Lien said in a telephone interview.
Even companies that did not go public have found willing buyers in the acquisition market, with Oracle (ORCL), SAP, IBM and other software giants snapping up smaller, cloud-based rivals for billions of dollars. That has not necessarily led to amazing results for the larger companies, as Oracle's earnings report earlier this week showed, though San Jose's Adobe (ADBE) has found success in switching to a cloud-based model for its core Creative Suite offering.
Analysts say that investors are interested in software as a service, or SaaS, companies because they provide a smoother revenues stream than traditional software businesses. While Adobe's revenues could be cyclical in the past, jumping when new editions of Creative Suite arrived but falling in other times, charging a monthly fee creates a predictable, less volatile revenue stream.
Neither Marin nor Model N provide a pure cloud model, showing how the business is evolving. Model N, which was originally established in 1999, offers both cloud and on-premises versions of its software, but it is a leader in a new category of software, revenue management. While most companies have different departments tracking and managing revenues apart from one another across the company, Model N's software combines those efforts into a streamlined system.
Marin, meanwhile, offers a rare cloud model that is not a pure subscriptions service, as it charges customers based on how much they use its platform. Since the company focuses on online and mobile advertising, the fastest growing ad market, it has an opportunity to be a huge win for investors, though it is far from profitable at present.
In that way, the two companies also represent a return to the past for Silicon Valley, which used to offer plenty of fresh software companies that either sought to solve problems and provide steady profits, like Model N, or focus on a booming industry and seek massive returns, like Marin.
"Silicon Valley grew over the decades by designing technology and software that made business, government and other organizations run better," PrivCo founder and CEO Sam Hamadeh, who studies private companies, said earlier this week, adding this week's IPOs fit that description as well.
Model N CEO and founder Zack Rinat agreed with Hamadeh after meeting with legions of investors before his IPO. "Investors are looking for the old way Silicon Valley delivered value to shareholders, which is focusing on very sophisticated business problems and solving it with sophisticated technology," he said Wednesday.
With Model N and Marin Software successfully public, a third M is now in the cross hairs: San Mateo's Marketo, which makes marketing automation software and has already announced its IPO plans.
Yahoo hits a new high, Apple and HP bouncing back
Silicon Valley's old-school companies did not have as good a week as new-school IPOs, but they ended with a bang on Friday, as the SV150 bounced back with a 0.8 percent gain.
Yahoo continued the success it enjoyed Thursday, when Oppenheimer upgraded the Sunnyvale Internet company's shares on hopes for its Asian holdings. With international magazine The Economist putting Yahoo investment Alibaba on the cover this week, interest in the company again gained and pushed the stock to its highest price since 2008. Yahoo gained 1.8 percent and closed at its highest price of the day, $23.26.
Apple continued to bounce back, gaining 2 percent Friday to close at $461.91. The Cupertino tech giant has now gained 10.2 percent from the 52-week low it hit on March 2. Another tech giant, Hewlett-Packard (HPQ), recovered from losses suffered Thursday with a gain of 3.2 percent, the best performance of the day among Dow Jones industrial average stocks.
Other Silicon Valley legends were not as fortunate, with Cisco (CSCO) dropping another 0.4 percent as a judge ordered the San Jose networking giant to pay $70 million in a patent-infringement lawsuit. Oracle also continued to slide, losing another 1 percent.
New companies stepped up to fill those losses however, with Workday gaining 2.3 percent, SolarCity increasing 3.4 percent and LinkedIn advancing 3.7 percent.
Wall Street gains, but down on the week as Cyprus hangs in balance
The larger indexes also gained Friday, though slightly less than the SV150, with all three major U.S. indexes increasing between 0.6 and 0.75 percent.
Still, all three indexes declined for the week, a rare occurrence in this y ear of strong gains and record-breaking highs. Uncertainty remains high going into the weekend, as well, with the situation in Cyprus still up in the air, but it seem investors are used to that by now.
"Whether you're talking about the euro zone or Washington, D.C., the market has been conditioned to these crises being resolved in the eleventh hour or kicked down the road," Quincy Krosby, market strategist at Prudential Financial, told Reuters.
Silicon Valley tech stocks
The tech-heavy Nasdaq composite index: Up 22.4, or 0.7 percent, to 3,245
The blue chip Dow Jones industrial average: Up 90.54, or 0.63 percent, to 14,512.03
And the widely watched Standard & Poor's 500 index: Up 11.09, or 0.72 percent, to 1,556.89
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.