In the last five months, two major human resource software makers were scooped up by two tech giants.
Analysts say that might not bode well for them and may provide an opportunity for Cornerstone OnDemand Inc. to boost sales.
In December 2011, technology corporation SAP AG in Weinheim, Germany, acquired SuccesFactors Inc. in San Mateo for $3.4 billion. Earlier this year, Redwood City software powerhouse Oracle Corp. bought Taleo in Dublin, Ireland, for $1.9 billion.
Brendan Barnicle, a researcher at investment firm Pacific Crest in Portland, Ore., said customers are sticking with Cornerstone because of these recent market shakeups, and SuccessFactors and Taleo could lose customer trust.
“Customers are trying to figure out how these acquired companies are going to fit into the larger parent companies,” Barnicle said.
Scott Berg, senior research analyst at Minneapolis’ Feltl & Co, said the acquisition has buoyed customer confidence in Cornerstone.
A stock surge followed last week’s quarterly earnings announcement. The Santa Monica company’s shares increased 7.8 percent for the week ended May 16 to close at $20.41, making it one of the biggest gainers on the LABJ Stock Index. (See page 56.)
Cornerstone reported a $4.9 million loss in the first quarter, compared with a loss of $4.5 million in the same period a year earlier. Sales rose 7 percent.
The 13-year-old company provides software that companies use for personnel management.
“Over the last five quarters we’ve doubled our client base,” said Adam L. Miller, Cornerstone’s founder and chief executive. “That means in a little over a year, we sold as much as we sold in the prior 10 years.”
Cornerstone was founded in 1999, and now has offices in the United Kingdom, France, Israel, India and New Zealand. The company has more than 600 employees.
One reason sales increased was a five-year, $20 million deal with the Treasury Department. Cornerstone will now provide its software to the government agency.
In April, Cornerstone purchased Auckland, New Zealand’s Sonar 6, a small business talent management service. That acquisition brought 375 worldwide clients from Sonar 6 and brings Cornerstone into a new market.
Miller said the purchase of Sonar 6 will help Cornerstone sell to companies with less than 500 employees.
“We didn’t have a good solution for that market,” he said. “Sonar 6 was arguably the best, so we bought it.”
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