Big Investors Snap Up Workday (WDAY) Despite Valuation by TechStockProspector

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									Robert DeFrancesco’s
TechStockProspector.com
August 16, 2013

Big Investors Snap Up Workday (WDAY) Despite Valuation

Read the August 2013 issue of Tech-Stock Prospector on your Amazon Kindle or
Kindle for iPad/iPhone reading app.

Here are some of the topics covered in the August 2013 issue:

*New Web Leaders: LinkedIn & Zillow
*Yelp’s expanding presence in mobile
*Why some big investors like OpenTable
*A look at a few tech IPO winners of 2013
*Tableau Software shakes up enterprise analytics
*Why Marketo shares doubled off the June low
*Gigamon offers high growth in the networking sector
*Cisco bulks up its security portfolio with Sourcefire purchase
*3 emerging names in IT security
*TSP Tech Disruptor Update: Ultimate Software
*Cornerstone OnDemand builds its cloud user base
*Riverbed Technology struggles to integrate OPNET acquisition
*Fortinet regains its footing in networking security
*Emerging growth focus: Tangoe flourishes in a tech niche
*Symantec’s turnaround story remains on track
*Aruba Networks regaining some competitive edge?
*Deal Report: FireEye IPO

Order the August 2013 issue of TSP here:
http://www.amzn.com/B004T6Z0ME

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A hefty valuation at Workday (WDAY, $72.59), a provider of cloud-based solutions
covering HR and financials, is not scaring off some institutional investors. In Q2,
several big shops bulked up on Workday shares:

*T. Rowe Price is now the #3 holder (7.86 million shares) after it increased its
position by 86%, purchasing 3.64 million shares
*Fidelity added 2.95 million shares (+56%); it’s now the #2 holder, with 8.2 million
shares
*Lone Pine Capital added 2.54 million shares and now owns 3.52 million shares,
making it the #5 holder
*Jennison Associates bought 1.17 million shares (+22%) and is now the #4 holder,
with 6.47 million shares
*Cavalry Management initiated a position of 731,850 shares
*Wellington Management opened a position of 497,860 shares
*Turner Investments more than doubled its position to 620,820 shares

These money managers are chasing growth: Workday’s fiscal Q1 (April) revenue
rose 61%, with subscription revenue (75% of total revenue) surging 85%. Unearned
revenue on the balance sheet rose 41% to $301 million.

But this growth is expensive. For fiscal 2014 (Jan.), the company looks for revenue
of $425 million to $440 million (up 55% to 61%). Even using the high end of the
guidance range, the forward price-to-sales ratio on the $12.7-billion market cap is a
whopping 28.8.

Workday’s core market has been HR, and there is still plenty of room for growth
here, particularly on the recruiting side. But the financials segment offers greater
potential for growth over the next three to five years. According to Workday co-CEO
Aneel Bhusri, the addressable market in financials is 3x the size of HR. The
company’s goal within five years is to have new bookings from the financials
segment approach HR bookings.

Workday is spending a lot of R&D dollars to build out its product offerings across
different specialties. As of now, management says its cloud solutions covering
financials have about 80% to 85% of the capabilities of legacy offerings; this will
only get better over the next 12 months. The company plans to have global
enterprise-class financials in general availability in calendar 2014.

General availability for the recruiting solution is on track for the first half of
calendar 2014. Workday will have a dedicated pre-sales team, but will coordinate its
actual go-to-market strategy so that recruiting will be sold as part of the overall HR
package. The recruiting sales cycle is expected to be fairly short because
management looks for solid demand to come from the installed base of HR
customers.

First out of the gate in terms of general availability will be Workday’s new business
intelligence (BI) cloud application covering Big Data; it is targeted for release in the
second half of this calendar year. The goal for this BI offering is to eventually disrupt
the enterprise data warehousing market.

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Tech-Stock Prospector Managing Editor Rob DeFrancesco has more than 20
years of experience covering the tech sector. He is a former senior writer with
Louis Rukeyser’s Wall Street.

TechStockProspector.com, launched in 2003, is an investment-research service
focused primarily on the networking, storage, security, wireless and software
sectors. Annual subscription: $350.

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