Jive Gets Strong IPO For Social Software

First day of trading sets the company's value near $800 million.
Jive Software got off to a strong start in its first day as a publicly traded company, prompting CEO Tony Zingale as well as Jive competitors to boast about "validation" of their hopes for the social software market.

In a call with press and analysts, Zingale boasted that Jive is "two years ahead of the nearest competitor" in the sophistication of its technology. On Monday, Jive sold 13.4 million shares at a price of $12 per share, raising $161 million that the company will be able to use for sales, marketing, and product development. When the stock began trading Tuesday, it immediately shot up in price, trading for most of the day at over $15. That gives Jive a market valuation of more than $800 million.

A couple of weeks ago, Jive was projecting that the IPO would raise about $117 million and result in a valuation of about $573 million. But the market for cloud-based business software has been heating up in the wake of SAP's recent acquisition of Success Factors.

Besides being good for Jive and its venture-capital investors, the strength of the IPO is good for customers, Zingale said. "Many of them were here celebrating with us on the NASDAQ today. They chose right, and they're very proud that we're at this juncture. All the concerns or doubts or questions that may have existed about the long term are now gone," he said.

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Jive might also use the money to strengthen its product line through acquisitions, as it did this year by acquiring the Microsoft Office integration tool maker OffiSync and Big Data specialist Proximal Labs, Zingale said.

Jive sells both hosted and on-premises software that allows companies to operate internal social networks with Facebooklike features such as personal profiles and personalized news feeds, as well as business-collaboration features such as file sharing. Jive is also one of the few social-software specialists to support both internal corporate collaboration and public-facing social communities. Jive announced IPO plans in August, posing the first real test of the stock market's appetite for enterprise social-networking companies. It's the strongest indication of how well business and social networking mix since LinkedIn's IPO in May.

Many of Jive's competitors are private companies, although IBM is also a strong player with IBM Connections and by some definitions Microsoft might be counted as part of the market, with its SharePoint collaboration software and Lync unified communications. Executives from Telligent, Moxie Software, and Lithium were eager to portray the IPO results as reflecting on the potential of the market category.

"The fact that they were able to have a really successful IPO when we're still really early--in the first innings of this market--bodes really well for the rest of us in the long term," said Lyle Fong, co-founder and chief strategist at Lithium, which competes with Jive in the market for public social communities for customer service and support.

Jive might actually be jumping the gun, he suggested, compared with other social businesses such as Facebook that have been in no rush to give up their existence as private firms. That's partly because the social-media market is at an early stage of its development, Fong said, "and enterprise social is even earlier."

Competitors also alluded to the fact that Jive has been losing money as a reason it might be seeking public funding. In the first three quarters of the year, Jive spent 55% more on sales and marketing and lost $38 million.

Telligent CEO Patrick Brandt, whose firm offers a range of products similar to Jive's, said his firm has been focusing on achieving profitability, rather than chasing market share at a loss. "We want to be growing, as well as profitable," he said. "We're really close." Telligent had a profitable quarter earlier this year, and in the quarter that ended in October software sales were up 80% and topline revenue was up 45%, he said.

Moxie CEO Tom Kelly and Lithium's Fong also characterized Jive as essentially a maker of on-premises software, even though it is now riding a wave of interest in cloud software. This is a matter of definitions over what constitutes "true" cloud computing, which some purists would limit to software specifically designed to be hosted in clusters of servers, without dedicated hardware for any one customer. Jive's core products were designed as enterprise software, but it now offers them in both on-premises and hosted configurations. By Zingale's definition, it's all cloud--just a matter of public cloud versus private cloud.

"Sure, they're cloud the way SAP is cloud," Kelly said, "even though no one would think of SAP as an easy-to-use product just because it's hosted." Moxie offers its software exclusively as a cloud service, believing that's the wave of the future. "We're going to lose to Jive when it's an on-premises solution because they can deliver that and we can't," Kelly said, but he sees that shaping up as a "Salesforce-versus-Siebel competition" where the product that is the best match for the cloud will win.

Zingale has heard this argument before, of course. "They're just jealous because half of the market is not available to them because they can't deliver out of the private cloud," he said.

Follow David F. Carr on Twitter @davidfcarr. The BrainYard is @thebyard

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