Kenexa Drags Down Software as a Service Stocks

MSPmentor’s SaaS 20 Stock Index declined 1.47% for the week ended September 12, dragged down by bad financial news at Kenexa Corp., which specializes in HR-related on-demand applications. It was the fourth consecutive week that our index, which tracks software as a service (SaaS) stocks, declined. Here’s what’s going wrong — and right — with SaaS stocks.

The latest bad news came from Kenexa (KNXA, -24.74% for the week), which announced that growth rates and profits would not meet Wall Street’s earlier expectations for the company’s Q3 and full year. Other big one-week decliners included Taleo Corp. (TLEO, -9.55%), Salary.com (SLRY, -8.68%), RightNow (RNOW, -8.02%) and SuccessFactors (SFSF, -7.16%).

The news wasn’t all bad. Fully, 11 of our 20 index members saw their shares rise on the week. Strong one-week performers included Concur Technologies Inc. (CNQR, +9.22%), Constant Contact (CTCT, +5.67%), Vocus Inc. (VOCS, +5.52%) and Salesforce.com (CRM, +5.05%). John Torrey, executive VP of corporate development at Concur, spoke Sept. 11 at the Jefferies Technology Conference. Apparently, investors liked what they heard.

Concur specializes in “on-demand Employee Spend Management services.” In generic terms, the company’s online software helps businesses to manage their expense reports. Concur in August announced plans to repurchase the company’s stock. The company’s Q3 revenue rose 76% to $54.9 million compared to the corresponding quarter last year, and profits more than doubled.

Concur proves that there are healthy profits in the SaaS market. However, SaaS companies are not growing their profits fast enough to meet Wall Street’s lofty expectations.  Our SaaS 20 Stock Index is now down 16.06% for the year.