Collaboration software vendor Atlassian has filed initial paperwork for a long-expected IPO, in a move that should fend off speculation of it being acquired by a larger vendor while generating the cash needed for expanding sales, marketing and product development efforts.
Not that Atlassian has been doing all that badly as a private company. It's been profitable for the last 10 fiscal years, and revenue has jumped sharply in recent years, from $148.5 million in Atlassian's fiscal 2013 to nearly $320 million in its fiscal 2015, according to Monday's F-1 filing with the U.S. Securities and Exchange Commission. It's seeking to raise about $250 million in the IPO.
Atlassian claims more than 5 million active monthly users spread across 51,000 customers. Its best-known and most lucrative product, JIRA, is used by software developers for issue and project tracking. Other products include the Hipchat messaging platform, Confluence for content creation and collaboration, and Bitbucket for code sharing.
Using the "land-and-expand" model, Atlassian has managed to grow through word of mouth, selling products online without a traditional sales force. This has freed up funds for increased focus on research and development. Atlassian's commitment here is significant indeed: During the past three years, it spent nearly $250 million—representing 36 percent of total revenue—on R&D activities. (By way of contrast, Oracle spent 14 percent of revenue on R&D during its fiscal year ended May 31.)
Post-IPO Plans
Atlassian has focused largely on software developers and as a result, knows that audience very well, says Constellation Research VP and principal analyst Alan Lepofsky: "They haven't tried to be a jack-of-all-trades and sold to everybody.”
The upcoming IPO makes things interesting for Atlassian, however. “Raising their profile beyond technical software development and support teams should be one of their priorities" for the funding influx, Lepofsky says. "The time is right for these guys. It’s now or never. They need to reach into new markets. How many developers are there?”
Atlassian is probably feeling a pinch from rivals such as Slack, which competes directly with Hipchat. Competition in the collaboration space is heating up overall, with the likes of Facebook at Work and Microsoft Office 365 gaining traction, Lepofsky notes.
The Bottom Line
Atlassian's most loyal and happy customers should breathe a bit easier after the IPO, since that should stave off the prospect of the company being acquired by a larger vendor, such as IBM or Microsoft, Lepofsky says.
The money should also help Atlassian grow, which is another positive for its installed base. “You want to be working with a company that has stability, that’s for sure," Lepofsky says. "And you want more of your industry using that tool. Companies like to buy [a particular software platform] when they know others like them are doing something similar."
