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Fascinating thoughts on Jive’s future

Really interesting piece by Lazarus Advisors on Seeking Alpha today. Here’s the high-level summary:

  • JIVE has underperformed dramatically since its 2011 IPO, falling a further 46% in 2014.
  • A recent significant insider purchase ($1.7M at $6.57/share) by a director with an impressive Venture Capital track record may indicate that JIVE’s days as a laggard are over.
  • I believe the partnership with Cisco is the first step to an outright acquisition of JIVE by CSCO in the next 12-18 months.

The author details their belief that the recent stock investment by Jive Software director Jim Goetz is a good sign:

Goetz’s involvement with JIVE dates back to 2007, and he has been on the board ever since. Aside from a distribution of 3.4M shares in March 2013 to investors in their fund, neither Sequoia nor Goetz have sold a single share, and remain the largest shareholders with a combined 13.9M shares, or 19% of the company. Note that on the IPO they did not cash out any of their stake, and actually exercised a warrant to buy more shares at $10.37. After eight years with the company, and after significant share price underperformance, Goetz more than tripled his direct personal stake in the company from 99k to 360k shares with this latest purchase. I think it is very telling that an individual who can participate in just about any private tech deal he wants finds compelling value in JIVE. Eight years is already a relatively long time to wait for an exit, so my bet is that he expects a liquidity event in the relatively near term. It is no secret that JIVE is amenable to a sale at the right price.

However, it is when he moves onto the potential for Cisco moving on from their existing strategic partnership with Jive into a full acquisition:

As outlined in this blog post by CSCO VP of collaboration marketing, Peder Ulander, the benefits of the deal for CSCO are significant in that the company will be able to go to market with a more robust offering to better compete with the likes of MSFT and CRM, both of which already have integrated social products (Yammer and Chatter respectively). I strongly believe that CSCO is looking at the JIVE partnership as a trial run, where if things go smoothly, it intends to buy the company outright within the next 12-18 months. Given that by then the deal would already have been de-risked from an integration standpoint, it would be very easy to complete. As with most software deals, the cost synergies would be significant due to the ability to consolidate the sales teams (JIVE devoted well in excess of 50% of revenue to sales and marketing 2014). JIVE wants to sell, and CSCO is particularly acquisitive and has a specific need that JIVE addresses. CSCO CEO John Chambers never met a bolt-on acquisition he didn’t like, and I think the JIVE partnership is merely the first step in a slow-motion takeover. In my view, that is what Jim Goetz is seeing down the line and explains why the all-star VC is putting so much more skin in the game at this stage.

I too can see this being on the horizon. From the outside, the partnership is developing nicely – existing Cisco customers that had purchased Quad/Webex Social are starting to migrate to the Jive Platform, and in my opinion, Jive is extending its lead over its competitors in the marketplace (IBM, SAP, Yammer and the like). Analysts such as Gartner and Forrester are continuing to rate Jive in their top two which is reassuring to those organisations looking to invest in the ESN space – enterprises and those smaller businesses alike.

If you’re interested in Jive Software’s future, this article is definitely worth digesting.

(Note that the author of the Seeking Alpha piece does have an investment in Jive Software. The author of this site does not.)

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