Jumpin' Jive

Back during the economic meltdown in October 2008, Jive Software (Nasdaq: JIVE), a provider of social and collaborative enterprise solutions, was forced to lay off a third of its staff. But a boom in social networking during the past three years has helped Jive regain its growth footing. Total revenue last year rose 67%, driven by a 73% increase in product revenue. For 2012, revenue guidance of $108 million to $112 million represents 42% growth at the midpoint.

Jive went public this past December at $12 a share (above the expected range of $8 to $10) and opened for trading at $15.12. Last week, the stock hit a post-IPO high of $21.09, and the market cap topped $1.2 billion.

Right up until the IPO, there was chatter that Jive was in negotiations to be acquired by SAP (NYSE: SAP). The likelihood of a buyout has diminished, though, at least in the near term, as Jive now sports a rich forward price-to-sales ratio of 10.8. Despite the high valuation and the fact that Jive is expected to lose money again this year, I would keep an eye on this promising company.

Thanks in large part to the rise of Facebook (Nasdaq: FB) and Twitter Inc. , the flow of information has never been greater. It is no surprise that social networking is increasingly becoming part of the workplace. The problem is many legacy enterprise applications make it difficult for employees, customers, and partners to discover information and share knowledge both within the enterprise as well as across outside networks.

Social enterprise software has the potential to improve significantly how employees work together and companies interact. IDC estimates that the total addressable market for social business software, including collaborative applications, is on track to reach $10.3 billion next year. The real tipping point is occurring now as social applications are beginning to displace some of the functionalities of solutions for content management, customer relationship management (CRM), and marketing automation.

The Jive Engage Platform, introduced in 2007, enables collaboration among employees within the enterprise as well as with outside customers and partners. Internally, it is used as a communications tool and collaborative workspace that supports the sharing of project information. Roughly 60% of Jive's product revenue is associated with internally focused communities. Customers and partners deploy the platform to connect socially in a structured online community that allows users to ask questions, post answers, communicate about a product, and address issues surrounding a specific project.

At the end of last year, Jive had 667 enterprises on its Engage Platform (with more than 17 million users), up from 590 at the end of 2010. Customers typically sign up for 12-month subscriptions, while some purchase subscriptions that extend out to 36 months. Top customers include SAP, NetApp, Hewlett-Packard, Cerner, T-Mobile, Sprint, Fidelity, Liberty Mutual, and UBS. An indication that Jive is adding larger enterprise accounts: the average annual subscription last year more than doubled to $110,000.

A survey of 350 Jive customers revealed that social business software users generally see an increase in customer satisfaction and sales win rates, along with a decrease in customer-support calls and time-consuming emails. Jive's average dollar-based renewal rate for transactions worth more than $50,000 is around 93%, indicating customers are quite satisfied.

Jive provides its platform as a public cloud service (representing about 63% of total revenue) and as a private cloud solution that integrates with application services from the public cloud. The deployment model enables access through Web browsers, desktop applications, and mobile devices. The platform can be integrated with legacy on-premises and hosted enterprise systems, including email, content management, CRM, marketing automation, product development, e-commerce, and instant messaging.

Looking ahead, Jive will continue to expand its partnerships with Accenture , Hewlett-Packard Co. (NYSE: HPQ), and Capgemini to push more large-scale deployments. In the second quarter, the company plans to launch Project Thunder, which will allow potential customers to sample Jive's public cloud offering for a limited amount of time. Management expects Project Thunder to help ramp up the pipeline of new business as potential customers get to see firsthand the benefits of social networking in the workplace.

Jive CEO Tony Zingale -- who is navigating the company against competitors Microsoft Corp. (Nasdaq: MSFT), IBM Corp. (NYSE: IBM), Salesforce.com Inc. , Tibco Software Inc. (Nasdaq: TIBX), and Yammer -- took over the top spot in February 2010. Previously, he served as CEO of Mercury Interactive (a provider of business technology optimization software), which was purchased by Hewlett-Packard in 2006 for $4.5 billion.