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Cloud Stocks: 2 Haves and 2 Have-Nots

The broader market opportunity is huge, but not every company is ready for the big leagues


Ready: Workday

Workday NYSE:WDAYIPO Date: Oct. 11, 2012
Return: 164%

Workday (WDAY) is focused on the enormous market opportunity of enterprise resource planning applications for the Forbes Global 2000.

For the most part, the top players in the space include SAP (SAP) and Oracle (ORCL) … but that’s actually good news for Workday, as these legacy companies’ systems are complicated, expensive and mostly out-of-date. Thus, it’s been easier for WDAY to snag top-notch clients including AIG (AIG), Four Seasons Hotels, Kimberly-Clark (KMB) and Lenovo (LNVGY).

As should be no surprise, building ERP software is a tough proposition, as it involves managing critical functions of a company like payroll, HR and financials. But the co-CEOs of Workday — Aneel Bhusri and David Duffield — are veterans of the ERP market, having helped to build PeopleSoft, which was the pioneer in the space.

Building another Workday likely would require huge amounts of capital to hire engineers, build a secure infrastructure and put together a large salesforce, as well as time to gain credibility. Customers want to make sure an ERP system is rock-solid before making a purchase decision.

Like Textura, Workday’s second-quarter revenues spiked — in WDAY’s case, by 72% to $107.6 million — and fiscal 2013 revs of $273.6 billion were more than double the previous year’s.

Article printed from InvestorPlace Media,

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