- Software IPOs: 2005 Year In Review
- Top 10 Worst Performing Software Stocks of 2005
- Software Stock Update: 2005 Year In Review
- The Incredibly Shrinking Software Industry
In a nutshell, and I recommend taking a look at the compilation of data points and analysis work done by Bill: 4 software IPOs in 2005, a lot of Web 1.0 software darlings are in the list of worst performers for 2005, and the aggregate valuation of the Software sector has shrunk by 10% in 2005 – to compare with a modest 1.4% growth of the Nasdaq and a nice uplift of 14.4% of the Internet sector.
Bill lists five reasons behind this systemic decrease of the sector, which does not look too good for 2006:
- Software is moving from “growth” to “value”
- Open Source and Software as a Service
- No big platform transition.
- Networking companies are encroaching on software company turf
- Being public ain’t so great
I would also add that the consolidation of the Software sector around IBM, Oracle, SAP, Microsoft and a few others is leading to limited M&A premiums – both for public and private companies.
There are exceptions though such as the $375M acquisition of Wily Technologies by CA, a 6X multiple on revenues and a nice payoff for VC investors who put in $37M.