Jive Software Inc., planning to sell shares to the public as soon as this year, is wagering that it can outpace Salesforce.com Inc. (CRM) and Lithium Technologies Inc. in luring companies to set up social networks.
Jive chose Morgan Stanley, Goldman Sachs Group Inc. (GS), Citigroup Inc. (C) and UBS AG (UBSN) to manage its IPO, which may happen this year depending on market conditions, people familiar with the matter said yesterday.
The 10-year-old company is vying with bigger rival Salesforce, startup Lithium and more than 100 software makers to attract customers in a market Gartner Inc. predicts will surge 60 percent from last year to $1 billion in 2012. Jive will also need to overcome the slump that’s forced at least 13 companies to postpone or withdraw IPOs since the U.S. had its credit rating cut by Standard & Poor’s, causing market swings.
“The market space is very crowded,” said Jeremiah Owyang, an analyst at research firm Altimeter Group in San Mateo, California. Still, Jive and Lithium are the most important startups in the field, he said. “Jive has become one of the dominant players.”
Jive may be valued at more than $1 billion in its IPO, with the company possibly selling a 10 percent to 20 percent stake, one of the people familiar with the matter said. Ana Andreescu, a spokeswoman for the Palo Alto, California-based company, declined to comment, as did representatives from Morgan Stanley, Goldman Sachs, Citigroup and UBS.
Sequoia, Kleiner Perkins
Founded a decade ago by Bill Lynch and Matt Tucker, Jive has raised $57 million in venture funding from Sequoia Capital and Kleiner Perkins Caufield & Byers, the two firms that backed Google Inc. Chief Executive Officer Tony Zingale joined the company’s board in 2008 and became CEO last year.
Gartner estimates that Jive’s revenue more than doubled last year to $70 million. Companies are bringing social- networking software into their offices, following the surging popularity of consumer applications Facebook Inc. and Twitter Inc., as well as business-networking site LinkedIn Corp. Jive’s software lets company employees collaborate on projects and communicate with customers.
The software also incorporates analytical data that track how customers are talking about and using a company’s products. For instance, NetApp Inc. (NTAP), the maker of data-storage technology, uses Jive to enable conversations about its equipment between customers, partners and employees.
Yum! Brands Inc., owner of the KFC and Pizza Hut restaurant chains, has its 6,000 corporate employees use the program to discuss business initiatives. Nike Inc. and Cisco Systems Inc. also are customers.
Salesforce, meanwhile, introduced its Chatter social- networking software last year. It’s now used by more than 80,000 companies. To bolster its social business, the San Francisco- based company paid $326 million in May for Radian6 Technologies Inc., adding the ability to track what’s being said about companies on networks such as Facebook and Twitter.
Microsoft, the world’s largest software company, isn’t a direct competitor, though its SharePoint server programs let customers’ employees create internal websites and collaborate on projects. Microsoft could invest in the market and become a bigger challenger to Jive at any time, said Altimeter’s Owyang. It has more than $52 billion in cash and short-term investments.
Microsoft also has existing partnerships with social- networking companies, such as Facebook and LinkedIn.
“We believe that social networking can deliver real business value for all kinds of organizations and we have made investments to make this possible,” the Redmond, Washington- based company said in an e-mailed statement.
Lithium, a startup based in Emeryville, California, says on its website that AT&T Inc., Barnes & Noble Inc. and Best Buy Co. are all using the company’s social software. The company helps businesses work more closely with customers and, unlike Jive is less focused on internal communication, said Lyle Fong, CEO of Lithium.
Jive’s IPO may face other challenges. Until last week, 2011 was on course to be the biggest year for IPOs since 2007. Then Standard & Poor’s cut the U.S. credit rating on Aug. 5, leading to a surge in market volatility. The Nasdaq Composite Index moved more than 4 percent on four consecutive days, and companies such as WageWorks Inc. and InvenSense Inc. postponed their IPOs.
Jive is unlikely go forward with its offering unless the market gets back to the “frothiness” from earlier this year, said Sam Hamadeh, CEO of PrivCo, a provider of financial data on more than 20,000 private companies. Instead, Jive is probably setting itself up to be acquired, he said.
“It’s more pressure to get the price up and try to get people to know that Jive Software is in play,” Hamadeh said in an interview from New York. “They’re an attractive acquisition target, and I think Goldman and Morgan Stanley (MS) signed on to sell this company.”
Still, Jive has taken steps to prepare for an IPO. In March, the company added executives from Google, Facebook and McAfee Inc. to its board. Google’s Sundar Pichai, Facebook’s Jonathan Hilfiger and McAfee’s Dave DeWalt brought the total number of directors to nine. DeWalt has since resigned from McAfee, which is now part of Intel Corp.
Zingale said in March that becoming a public company would improve access to capital for acquisitions and make Jive a more visible competitor to Microsoft, International Business Machines Corp. and Salesforce.
“We’re here to build the next great enterprise software company,” he said in an interview when the board appointments were announced on March 30. “The time was right to expand the board and bring on this kind of expertise.”