RightNow Aquires Q-go - Analyst Blog

RightNow Technologies Inc (RNOW) has agreed to acquire Q-go.com B.V., a natural language search solutions provider. This will add approximately $8 million in revenue for 2011. Q-go's edge technology delivered higher conversion rates, increased revenue and improved web visitor experiences for corporations.

The company has also guided revenue of approximately $51 million, recurring revenue of approximately $41 million and non-GAAP earnings per share of approximately 16 cents for the fourth quarter of 2010. This exceeds the earlier guidance issued by the company.

RightNow is a participant in the on-demand CRM market a fast growing sub-market of the total CRM market that specializes in small- and medium-sized enterprises, but the company has been working to become a larger player in the industry by going after larger deals, and expanding on existing relationships.

The company is able to win and retain clients based on its ease of use, cost, breadth of solutions, and top-notch technology. Its solutions leverage the Internet to optimize customer self-help via a company's website, thereby reducing the need for calls to customer service representatives, and lowering the overall costs to the client.

A distinct positive of the on-demand model is that there doesn't need to be a lag between when an upgrade is implemented and when its customers purchase the upgrade. Therefore, we expect that there should be no slowdown in growth before the release, as it mostly happens with traditional software vendors.

Customers like the company's land-and-expand strategy because it allows them to experience the benefits of its solutions quickly, minimize upfront costs and risk and see real ROI before making larger commitments, thereby increasing the value proposition to customers and shortening the sales cycle. Customer experience is a key competitive strategy.

While discretionary spending in IT is very tight currently, many of its clients view RightNow solutions as essential not discretionary. Many of its repeat and expansion transactions happened because it is rolling out new modules and enhancements every single quarter.

The company shifted its development process a couple of years ago away from a big bang major release every two years to a quarterly released methodology which has really accelerated its ability to bring new capabilities to the market. This release schedule gives its sales and services teams the benefit of carrying an expanded sales kit into every meeting and fosters ongoing communications with customers.

RightNow has been able to grow rapidly over the past several years, and the company has recently decided to take advantage of the uncertainty in the industry by spending more heavily towards product build-out and expansion of its sales force. If the company is unable to execute and win new business, there will be significant deterioration of its bottom line as its break-even point will be raised.

Additionally, the change to the sales force compensation plan to try and move to a more subscription-based model may cause some push-back from the sales personnel, which could cause a slower sales cycle, thereby negatively affecting earnings.

RightNow Technologies is a leading provider of on-demand customer relationship management (CRM) software solutions, designed to optimize customer service operations for businesses of all sizes. SAP AG (SAP) operates in the same industry.

 
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