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Guidewire Software: The Little IPO That Could

GWRE continues to push higher after Street-beating Q4 results


2012 IPO Guidewire Software (GWRE) kept chugging along after the bell Tuesday thanks to the posting of yet another strong quarter.

In its fiscal fourth quarter, GWRE revenues spiked by 43% to $96.9 million and earnings came to 25 cents a share, up from 10 cents a share in the same period a year ago. Both figures beat the Street consensus, which had revenues at $93.1 million and earnings at 14 cents a share.

Shares launched about 8% in early after-market trading, putting Guidewire’s return to roughly 170% since it came public in January 2012.

Guidewire is not a cloud company; instead, its software is based on the traditional on-premise approach, though it does have a web-based version. While it does seem archaic, there’s a method to the madness — GWRE focuses on the property and casualty insurance market, and the companies in the space want to maintain control over their data.

Because of its singular focus, Guidewire has been able to win contracts against biggies like Oracle (ORCL) and IBM (IBM). The software has become the systems-of-record for large insurance companies — including Tokio Marine & Nichido Fire Insurance and Zurich Financial Services Group — and helps with core functions like underwriting and policy administration, claims management and billing. The result has been substantial costs savings and efficiencies for customers.

For the, I had a chance to interview the CEO of Guidewire, Marcus Ryu, and this particular quote stuck out:

“While at Ariba, I saw the power of enterprise software and how it can change the economics of an industry. But there also were the dangers of the dot-com era. One was growing too fast.

“At Guidewire, we look to the long term. This means moderated growth and a focus on the customers. Our attrition rate is 0%, referenceability is 100% and renewals are 100%.”

This strategy goes against the grain of many other cloud-based operators, which have been growing at breakneck speeds. But Ryu doesn’t seem to care about what the crowd is doing. Instead, he looks at the best technologies and approaches to help his customers achieve top-notch results.

The results are the proof in the pudding. And more importantly, it shows that when it comes to IPOs, a solid company doesn’t have to be a hyper-fast grower or adopt the bleeding-edge in technologies.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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