SaaS Stocks Setting the Pace on Wall Street in 2009

Despite new concerns about Salesforce.com's growth rate, software as a service (SaaS) stocks are outperforming the Dow, S&P 500 and Nasdaq so far this year, according to our SaaS 20 Stock Index. And a new relationship between IBM and Intuit shows where SaaS is heading next. Here's a look at SaaS trends on Wall Street.

Yes, the SaaS 20 Stock Index slipped 0.35% for the week ending May 22, 2009. Intuit (INTU) was among the biggest weekly winners, up 11.09%. While Salesforce.com (CRM) fell about 10 percent for the week.

However, the SaaS 20 Stock Index is up 11.52% year to date. That easily outpaces broader indexes, according to Associated Press data:

  • The Dow Jones Industrial Average is down 5.69 percent this year.
  • The S&P 500 is down 1.80 percent.
  • The Nasdaq is up 7.29 percent.

Winners and Losers In SaaS

The latest SaaS earnings news has been a mixed bag:
  • Intuit (INTU), which has a growing SaaS business, delivered strong quarterly earnings on May 21.
  • And Salesforce.com (CRM) -- the poster child for SaaS -- predicted slowing top-line growth on May 21, which caused concern among investors.
First, the good news.  Intuit's quarterly revenue ($1.434 billion) slightly beat Wall Street consensus expectations of $1.42 billion, according to Barron's. And earnings per share ($1.68) easily beat Wall Street's consensus expectations of $1.61, Barron's added.

Meanwhile, Intuit announced a small business appliance in partnership with IBM. Big Big plans to offer an $8,000 appliance that comes with a pre-integrated version of Intuit QuickBooks Enterprise Solutions software.

Yes, there is a SaaS angle here: Customers will also have access to remote services such as managed security and hosted data backup and recovery services through IBM's cloud services, according to IBM. And resellers will play a key role in promoting the Intuit products and IBM services.

Salesforce.com: Slowing Growth?

Still, investors got a little nervous after Salesforce.com on May 21 predicted slowing growth. According to The Motley Fool:
  • First quarter results were strong -- with net income jumping 88 percent.
  • Annual profits will likely be 8 percent higher than previously expected.
  • But CEO Marc Benioff cut revenue guidance, which triggered investor concern.
That aside, the SaaS 20 Stock Index's performance continues to outpace the broader stock market so far in 2009.

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