Should SAP Acquire Zendesk Or Freshworks?

Photo by Petr Machá?ek on Unsplash

Cloud Customer Service software company Zendesk (NYSE: ZEN) has recently launched a CRM platform while rival Freshworks has launched an AI powered customer engagement platform.

Zendesk’s Financials

Zendesk recently reported its first-quarter results that topped analyst estimates. Q1 revenue was up 40% to $181.5 million. GAAP net loss was $44.7 million or $0.41 per share. Non-GAAP net income was $5.1 million or $0.05 per share. Analysts expected earnings of $0.03 per share on revenue of $179.6 million.

Among key metrics, Zendesk’s paid customer accounts grew to 145,600 from 136,600 at the end of Q4 2018 and 125,500 a year ago. Zendesk Support added 2,000 new customers to end the quarter with 75,600 paid customer accounts. Paid customer accounts for other Zendesk products grew by 7,800 to 24,700. Paid customer accounts with 100+ Support agents accounted for nearly 40% of Zendesk’s Support ARR. This number was flat over the previous quarter but was 38% in the previous year.

By region, revenue from US grew 39%, EMEA grew 38%, APAC was up by 39%, and other regions were up 57%.

For the second quarter, Zendesk expects revenues of $191-$193 million with a GAAP operating loss of $44-$42 million. It expects to end the current year with revenues of $802-$810 million with a GAAP operating loss of $164-$160 million. The market was looking for revenues of $172.8 million for the quarter and $779.3 million for the year.

Zendesk’s CRM Platform and Upselling Push

In November 2018, Zendesk expanded its target market from customer service to the broader customer management market with a CRM platform called Zendesk Sunshine and salesforce automation tool Zendesk Sell.

Zendesk Sunshine is built on open standards and the public cloud to enable customers to modernize their architectures and build better customer experiences. It leverages AWS’s security, scalability, and reliability to deliver a more flexible CRM platform and enable organizations to quickly and easily move data between Sunshine and their systems and applications. The platform is organically developed.

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