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Eloqua Offers 50% Discount to Software-as-Service Peers in IPO

Aug. 1 (Bloomberg) -- Eloqua Inc., whose software helps companies including American Express Co. target new clients, is seeking a valuation about half that of peers in its initial public offering as it vies for investors in a crowded field.

The cloud-based software maker plans to raise as much as $92 million in a sale today. The midpoint of the $9.50 to $11.50 price range values Eloqua at about 4 times sales in the year through June, compared with an average multiple of 8.1 for 14 competitors, according to data compiled by Bloomberg.

Eloqua is going public after ExactTarget Inc., Bazaarvoice Inc. and ServiceNow Inc. completed IPOs in the past six months. Its late-comer status may have prompted the company to offer a discount to lure investors with myriad opportunities in the software-as-a-service industry, according to Brian Barish, president of Denver-based Cambiar Investors LLC.

“There are plenty of options that are already established, and that’s the obvious disadvantage to new entrants,” Barish, who helps oversee about $7 billion, said in an interview. “To entice people, you do need a bit of a discount.”

Eloqua’s subscription software helps companies target their marketing to reach the right audience, measure the effectiveness of marketing campaigns and prioritize sales leads based on probability to close. The products range in price from $2,000 a month for 4-10 users to $6,400 a month for 250 users.

Dynamic Space

Revenue at Vienna, Virginia-based Eloqua jumped 40 percent last year to $71.3 million. In the second quarter of 2012, sales rose 39 percent to $23.2 million from a year earlier. The company has more than 1,100 customers, including Adobe Systems Inc., American Express and Dell Inc.

Eloqua is poised to benefit as companies spend more money trying to convert leads into customers, said Chris Fletcher, an analyst at Stamford, Connecticut-based research firm Gartner Inc. who covers business-software makers.

“You’re getting better and better insight about the quality of the new business opportunity stream coming into your company,” said Fletcher. “You can use the analytic tools to get some idea or make a prediction on the revenue in coming quarters.”

Clients will also probably gravitate from traditional software to software as a service, a market that Gartner expects will increase to $22.1 billion in 2015 from $12.3 billion last year. Using this model allows companies to save money because they access programs via the cloud instead of storing them on their own servers.

Joe Chernov, a spokesman for Eloqua, declined to comment.

Marketing Costs

While revenue rises, Eloqua is spending more to fend off competition. Sales and marketing costs increased 28 percent in the first six months of 2012 to $17.52 million. That, along with a litigation settlement, led to a $5.5 million net loss in the first half of the year, compared with a net loss of $3.5 million a year earlier.

Eloqua said on July 20 that it plans to sell 8 million shares on behalf of itself and existing shareholders, equivalent to a 25 percent stake.

Recent IPOs from companies that provide software as a service indicate that there’s investor demand for the stocks. ServiceNow, whose software helps companies manage human resources and financial information, has surged 50 percent since its IPO on June 28.

Demandware Inc., an e-commerce software provider, has gained 54 percent since its offering in March, and marketing-software provider Bazaarvoice Inc. has climbed 29 percent since its IPO the previous month. Closely held Marketo Inc., which Eloqua names as a competitor in its prospectus, has said it will look to go public after the U.S. presidential election in November.

Eloqua’s biggest investors are JMI Equity, Bay Partners and Bessemer Ventures, which will own a combined 62 percent of the company’s outstanding stock after the offering, according to the prospectus. None of them are planning to sell in the IPO.

JPMorgan Chase & Co. and Deutsche Bank AG are leading the offering. The stock will be listed on the Nasdaq Stock Market under the symbol ELOQ.

To contact the reporters on this story: Ari Levy in San Francisco at; Lee Spears in New York at

To contact the editors responsible for this story: Tom Giles at; Jeffrey McCracken at

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