Why Is the CEO Optimistic After the Internal Restructuring?
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When Bazaarvoice (NASDAQ: BV) went public in February 2012 with a $12 IPO, investors were enthusiastic. Within a month the stock was trading at $19.89 on March 30, 2012. As a social commerce provider the company offers solutions to capture, exhibit, and scrutinize virtual word of mouth (WOM) over various social media platforms, including ratings and reviews by end-users. Its clients put end-users at the heart of their business strategy development process by incorporating consumer sentiment.
As social media based customer relationship management is becoming the “norm” among major brands, the prospects of companies like Bazaarvoice were positive. However, after its founding CEO Brett Hurt was replaced out of the blue by then CFO Stephen Collins, stock of Bazaarvoice collapsed to $6.65 early this year on January 11, 2013. The decline in stock happened after Bazaarvoice management acquired San Francisco based PowerReviews, which contributed to doubling of second quarter losses in 2012.
Growth of Online Social Customer Relationship Management
Most of the loss of investor confidence for Bazaarvoice was company specific. Its competitors and the industry as a whole continue to thrive amid the expanding U.S. economy as more and more companies are focusing on online media to build better customer relations. Marketing departments are starting to integrate social media in their product development phase as well. One of Bazaarvoice’s clients, OneDirect, claims that its conversion rates went up 45% after they integrated customer reviews in their multi-channel sales strategy. In the Software as a Service (SAAS) industry, social CRM is truly the next revolutionary growth segment. The potential of social CRM was demonstrated when Salesforce.com (NYSE: CRM) made its largest acquisition offer to buy ExactTarget earlier in June 4, 2013, for $2.5 billion, which included a 50% premium for its shareholders.
Revenue Rebounding at Bazaarvoice
At present, 42 of the Fortune 100 companies and 126 of the Fortune 500 companies are using Bazaarvoice’s services, and there is room to grow its clientele and overall revenue. The momentum for Bazaarvoice had been positive as it has increased enterprise clients by 41% in second half of 2013. It signed up 170 new companies compared to 130 in first half of 2013. It takes around 120 days to receive “revenue” from a new client, and so far it has received payments for rendered services from 111 clients with 59 left in the revenue channel.
In first quarter of 2013, Bazaarvoice earned a total of $43.3 million revenue. GAAP projected sales indeed grew by 37.9% compared to last year’s first quarter which was $31.4 million. With positive results in the first two quarters of 2013, the stock price of Bazaarvoice has increased sharply from $7.05 on May 22, 2013, to $9.65 on June 10, 2013 - a 36.88% gain.
ExactTarget saw its stock price soar by 61.65% as share price climbed from $20.81 on January 2, 2013, to $33.64 on June 17, 2013. As a global provider of cross-channel SAAS ExactTarget provides marketers with a range of integrated applications for campaign management. ExactTarget isn't profitable yet but it isn't losing year as much as Bazaarvoice relative to BV. Certainly, Salesforce.com believes they can take ExactTarget and turn it into a contributing unit of their business. Exact Target is predicting large sales increases for 2013 with a guidance of up to $379 million compared to under $300 million in 2012. One of the largest boosts for Exact Target will be the massive increase in their sales team when integrated with Salesforce. Prior to the merger, Exact Target had about 440 people on the sales team and now there will be 1000s of Salesforce employees selling the Exact Target product. All of Salesforce's existing customers will likely have the option to integrate Exact Target into their present system. Currently, Salesforce gets about 45% of revenue from non-sales cloud products and it will likely grow this portion with Exact Target.
Bazaarvoice luckily has a specialized niche that they can dominate and a smaller, or agile company to try and stay ahead of Salesforce. Having a smaller 800 person team has some benefits. Bazaarvoice could also avoid Salesforce by targeting smaller businesses that usually cannot afford Saleforce systems.
While from a distance the market sees the developments at Bazaarvoice optimistically, the restructured management has to prove its worth by turning the table first. Investors were skeptical about buying out PowerReviews, but it was indeed a strategic move to take out a close competitor who was competing based on price. Whatever internal restructuring going on at Bazaarvoice HQ, it seems the process is stabilizing. Current CEO, Stephen Collins commented on the situation saying that they have now have a completed leadership team and that they look forward to helping networks of brands and retail clients in quest of the next phase of growth.
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