On-demand customer relationship management vendor RightNow Technologies stumbled badly in its fourth quarter. The company issued a warning late in the afternoon of Jan. 4 that its fourth-quarter 2006 revenues would see a shortfall, as will its earnings.

Company officials said fourth-quarter revenues, which will be reported Jan. 31, will come in at about $28 million—nearly $4 million below its previous guidance of between $31 million to $31.5 million. Officials also said investors should expect an earnings shortfall, but did not elaborate beyond restating its previous guidance of between break-even and a loss of 2 cents a share.

“While we are disappointed that our fourth-quarter revenue and earnings were below our guidance, bookings were strong for the fourth quarter and full year,” said Greg Gianforte, founder and CEO of RightNow Technologies, in Bozeman, Mont. “Looking forward, we are focused on the first-quarter release of RightNow 8 and continuing to build on the business success we saw in 2006.”

Click here to read about RightNow’s acquisition of rival Salesnet.

In a statement, the company said it expected fourth-quarter bookings—the amount of revenues plus the change in deferred revenues—to be about $41 million for the quarter. Cash from operations is expected to come in between $4 million and $5 million.

In a Jan. 4 research note, The Goldman Sachs Group analysts Christopher Sailer and Rick Sherlund wrote that for subscription vendors, investors focus on bookings as a leading indicator of how a company is faring. Sailer pointed out that RightNow’s term revenue was up 31 percent year-over-year, and fourth-quarter bookings for 2006 of $41 million were “a bit better than our estimate, and implied 50 percent 2006/2005 growth.”

According to RightNow officials, the quarter’s missed numbers were primarily the result of a shift from perpetual (or upfront) license fees to recurring (or over time) license agreements, as well as one large transaction that was expected to be a perpetual license, but closed as a recurring revenue transaction.

Goldman Sach’s Sailer agreed that the accounting shift is partially to blame, but also pointed the finger at other areas as well. “We believe recent sales leadership changes and some customer hesitation in advance of the RightNow 8 release may have also contributed to the weakness,” he said.

Goldman Sachs listed key risks for RightNow as a volatile perpetual license business, a planned revenue recognition shift from term to subscription, and sales force disruption.

By contrast, Salesforce.com—arguably the poster child for on-demand CRM software—has had a banner year. Earlier in the week of Jan. 1, Citigroup analyst Brent Thrill wrote in a research note that he favors companies with a software-as-a-service model—since , he said, it generates more stable revenue. He pointed to Salesforce.com as a company that “continues its dominance,” having doubled its number of user licenses in its last fiscal quarter, which ended in October 2006.

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