With An Astounding $6 Billion Valuation, ServiceNow Has Become ‘The Next Salesforce.com’

With An Astounding $6 Billion Valuation, ServiceNow Has Become ‘The Next Salesforce.com’

JULIE BORT AUG. 2, 2013, 4:32 PM 2,648

It’s been over a year since ServiceNow’s IPO practically saved the post-Facebook IPO market single-handedly. In June 2012, with an opening share price of $18, the company had a jaw-dropping valuation of over $2 billion. (It was originally priced at $17 the night before the IPO.) And it and hadn’t even hit annual revenues of $100 million. Fast forward to this week: ServiceNow’s shares are trading at about $45, giving it a nearly $6 billion valuation. That makes it the fifth most valuable company in Bessemer Venture Partners new “Cloud Index” that tracks the 30 biggest software-as-a-service public cloud companies. At the time of its IPO, ServiceNow, which offers cloud apps that automate the help desk function for enterprises, was considered proof that the tech industry was in another bubble. But, it turns out, it was proof that ServiceNow is the next Salesforce.com, CEO Frank Slootman told Business Insider.“We’re growing into our valuation,” Slootman told us in his classic, straight-talking style. “I was told during the IPO a year ago that $17 was a lot and now it’s at $45. Salesforce.com is perpetually revered as an overpriced stock. And when people couldn’t get in on that in the early days, they got screwed.”

On Thursday, the company for the first time reported revenues of $100 million in a single quarter — $102.2 million to be precise. That’s a beat. Analysts expected $97.4 million and an 80% year-over-year jump. It missed on profits, reporting a net loss of $7.8 million, 6 cents per share, when analysts were looking for a 5 cents a share loss, excluding special items.

The loss is part of the plan, Slootman says.

“Essentially companies are valued on profits, but if you want to have large profits, you have to have large revenues. It’s just math,” Slootman says. “The faster you grow, the faster you get to large profits.”

So ServiceNow is investing in growth as fast as it can, it says, trying to hire about 200 employees a quarter.

Slootman says it’s stock gives it such a big advantage when hiring talent in the tight Silicon Valley market, the company doesn’t woo employees with perks.

“We’re very much a blue-collar company. We don’t do all the lattes and back rubs and all that. My favorite perk is high-equity value,” he says.

In other words, the stock is worth so much that employees are paying off their houses and setting up big college funds.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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