Pete Winston

Consider SuccessFactors for the Long Term

Disagree 100%

Sorry – but I really disagree this time. I battled to go w/this stock but gave it up. This is not a quality stock for long-term or anytime. I almost went with this stock 3 days ago but really did my due diligence: dissected financial data, carefully read the SEC 10-K & archived files, multiple visits to SF’s web site, reviewed all blogs, watched a demo online, & analyzed competitive stocks & products. I’ll give SF 18-24 months before they’ve exhausted all avenues of digging themselves out of debt & fold: 2007 Net Profit Margin: (minus) -119.11%; 2007 Operating Margin (minus)-110.13%. Net loss increased from (-20.8), (-32.0), (-75.5 million) (2005-2007) Accumulated 2007 deficit: (-141.3 million) ROE=minus (-5,731.41%) If they do survive – they’ll never show a profit.

Per the SEC 10-K the growth of smaller customers (SME) outpaced larger customers (Enterprise) in 2007. The future is in the small to mid-size marketplace - not Enterprise. So, the ongoing trend will be smaller customers. Bleeding marketing costs have marginally impacted the spacious small to mid-size market. Bloated salaries & overhead are expected to continue uninterruptedly so that sales/marketing can chase smaller customers whose revenue can’t cover the debt ratio. The CEO & CFO both need a refresher course in Basic Accounting 101.

Per Sec 10-K the sales/marketing expenses will escalate. As % of revenue - these expenses were 127% in 2005; 99:% in 2006 & 112% in 2007. Fiscally responsible customers may eschew upgrades in this tight economy. With the risk of SaaS tech price wars raging daily, expensive training costs, fewer upgrades, renewal cancellations, recession, currency fluctuations in SFSF global markets, SF’s revenue might get further swallowed-up in debt.

This bearish market offers stronger performing stocks at 2004-2005 prices – so why SFSF? Call me when they crash!