Is Jive’s Stock Overvalued?

Jive Software (NASDAQ:JIVE) is trying to appeal to both cloud-loving and server-needing companies alike, but that is leading to some debate over the company’s valuation. Cloud-based companies are often valued much higher than physical software companies, and though Jive is being traded at cloud-like prices since its IPO last week, some argue that the company is over-priced since it’s actually a hybrid. Jive does 60% of its business in the cloud, but is still able to accommodate the remaining 40% that require servers.

At the close of business on Monday, the company was trading at $859.5 million, or roughly 12 times the company’s annual sales.  SuccessFactors, a solely web-based software company, was recently purchased by SAP for 11.7 times sales while physical software companies such as Oracle and Microsoft have ratios ranging from 4.1 to 3.

Bloomberg Businessweek quoted David Sacks, founder of Yammer, a social networking software provider, who said, “There’s just one problem with Jive trying to ride the coattails of SuccessFactors and other cloud company valuations: Jive is not cloud.”

While Sacks believes that Jive should be docked for riding the line, Jive CEO Tony Zingale markets the company’s strategy as offering the best of both worlds.  “We’re not religious about it. We let customers choose,” Zingale said in an interview per Bloomberg Businessweek.