Jive Is Alive

What is shaping up to be one of the biggest IPO weeks in years is off to a strong start.

Jive Software (NAS: JIVE) was originally looking to price its debut between $8 and $10 a share. Healthy demand helped underwriters price the debutante at $12 last night, and it still wasn't enough. The stock opened at $15.12 this morning.

Jive provides a social platform for businesses. Unlike consumer-facing social networks including Facebook and LinkedIn (NYS: LNKD) , Jive provides closed platforms for employees to communicate with one another in engaging and productive ways.

If this seems like it would be an easy feat for any tech company worth its salt to develop in-house, think again. Some of Jive's 657 customers include Hewlett-Packard (NYS: HPQ) , T-Mobile, and SAP. They combine to create a lively and secure social interface powered by Jive serving 17 million users.

This doesn't mean that it's alone. We've seen salesforce.com (NYS: CRM) come on strong in this niche with Chatter. Yammer is another entrenched player.

Thankfully, Jive is growing quickly. It has posted revenue of $16.9 million, $30 million, and $46.3 million over the past three years, respectively. The top-line success isn't working its way down to the bottom line. Jive hasn't been profitable in the past, and it expects losses to continue in the foreseeable future.

Some may also fear that Jive's solution is built on open source, but we can't discredit that as a model. Look at Red Hat (NYS: RHT) carving out a cozy living by building enterprise solutions on top of Linux and dishing them out on a subscription basis to corporations.

The platform's simplicity is also something that can't be knocked. We've seen LivePerson (NAS: LPSN) thrive as major enterprise clients turn to the company for a live chat platform. If a third-party solution works and is cost effective, companies won't risk going elsewhere or handling the process internally.

This doesn't mean that Jive is cheap. Its IPO priced the offering at roughly $700 million, and its buoyant opening this morning pushed the stock up to nearly $900 million. The glitz of social networking makes this a compelling story stock, but the small revenue numbers and lack of profitability may keep gains in check.

However, this doesn't mean that investors should bet against the company. Jive hits the market with crosshairs on its neck hairs -- and that's a good thing. Jive is a compelling acquisition target for a larger enterprise software company hoping to spice up its ho-hum organic growth.

If buyout chatter does get started, I'd recommend Jive's own platform to keep it between friends.

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At the time thisarticle was published Motley Fool newsletter services have recommended buying shares of LivePerson and Salesforce.com. Motley Fool newsletter services have recommended shorting Salesforce.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story, except for HP. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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