A Gartner report published earlier this year estimated the worldwide public cloud services market to grow 18.5% in 2013 to $131 billion. Most growth in the market is driven by infrastructure as a service (IaaS), including cloud computing, storage, and print services. This sub-sector is projected to grow 47.3% this year, to $9 billion. Gartner also estimates the cloud services market to grow to $677 billion by 2016. The market is dominated by North America, which accounts for 59% of worldwide spending.
Michigan-based Covisint is a recently listed player in the cloud computing market. The company was founded in 2000 by a consortium of global automotive manufacturers that wanted to be able to collaborate and transact with suppliers worldwide to reduce procurement costs. Till recently, Covisint was a wholly-owned subsidiary of Compuware Corporation, when it acquired Covisint in 2004 for $7 million.
Covisint is among the leading providers of cloud engagement platform services that enable organizations to connect, engage, and collaborate with various communities, including employees, customers, business partners, and suppliers. The company's cloud engagement platform, offered as a service, integrates cloud-based identity management, data exchange, and application development capabilities with on-premise and hosted enterprise systems. For instance, the platform enables doctors to access a patient's medical history, including test results and medication details. Covisint's platform is scalable and can be customized to the requirements of an organization to meet the organization's needs of processes, content, and branding.
Covisint's products are focused on the global automotive, healthcare, and energy sectors. The company is now working to expand its offerings to other industries. Today Covisint has more than 3,000 global customers connecting with more than 80,000 end consumers, partners, and suppliers. Overall the platform supports more than 18 million users worldwide. Customers include General Motors(GM), Blue Cross Blue Shield Association, and Vermont Blueprint for Health, to name a few. Covisint is largely dependent on the automotive industry, which brings in more than 53% of its revenues. General Motors is its biggest customer and accounts for nearly a third of revenues.
Covisint charges customers a subscription for its services. It has seen strong revenue growth over the past few years. Revenues grew from $54.2 million in 2011 to $74.7 million last year. Over the same period, adjusted EBITDA fell from $4 million to $2.6 million. For the year ended March 2013, revenues grew 22% to $90.7 million, and losses increased to $5.6 million. Revenues for the quarter ending June 2013 grew 17% $24.1 million. Losses, however, have continued to widen and grew from a modest profit of $0.1 million last year to a loss of $4.7 million in the quarter.
Last month, Covisint listed on the Nasdaq under the symbol COVS. It sold 6.4 million shares at a price of $10 each to raise $64 million. Covisint plans to use these funds for use to grow operations and toward working capital management. The stock rose to $14 soon after listing. It is now trading at $12 with a market capitalization of $360 million.
Gartner projects the platform-as-a-service (PaaS) market to grow 16% annually through 2016. Covisint operates in a high-growth market, but it still needs to turn a profit and reduce its dependence on General Motors. The new influx of funds will help the company to diversify operations to support other sectors.