SaaS-based enterprise application services provider Workday (NYSE: WDAY) may have delivered an impressive quarter, but the market is not impressed. During the recent result announcement, Workday announced a change in accounting practices and a re-organization of its operations – a move that has not gone down well with the analysts.

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Workday’s Financials

Workday’s fourth quarter revenues grew 35% over the year to $436.7 million, ahead of the Street’s forecast of $431 million. EPS of $0.07 was also significantly ahead of the market’s estimated loss of $0.01 per share.

For the quarter, subscription revenues grew 39% to $365.2 million and professional services revenues grew 16% to $71.5 million.

Workday attributed the impressive performance for the quarter to the confusion in the market stemming from Oracle’s purchase of NetSuite. According to CEO Aneel Bhusri, the acquisition resulted in “turmoil within the NetSuite customer base” as most companies “chose not to do business with Oracle”, thus opening doors for Workday.

Workday ended the year with revenues growing 35% to $1.57 billion driven by a 39% increase in subscription revenues to $1.29 billion. For the year, Workday reported a net loss of $2.06 per share compared with a loss of $1.53 per share a year ago.

For the current quarter, Workday expects to deliver revenues of $467 million-$468 million, ahead of the average estimate of $450 million. It forecast revenues of $2.005 billion-$2.025 billion, above market forecast of $1.99 billion. By achieving revenues of over $2 billion for the year, Workday will become the second true cloud company to reach that milestone, second only to Salesforce.com.

Workday’s Issues

Despite the impressive quarter, the market wasn’t too pleased with Workday. It announced plans to restructure its sales team to change the way it approaches the market. Workday has split its North American business into two groups, large enterprise and medium enterprise and has aligned its sales team with this break out as well. Analysts believe that the re-organization of the sales team is a source of distraction. I am not sure if this is a reasonable objection. If they want to go after the NetSuite customer-base, they do need to do so with a different sales model than their regular enterprise sales model. So why are the analysts irritated?

Additionally, Workday announced a change in the accounting practices so that it will no longer provide a billings outlook. The change comes as Workday became one of the first software companies to adopt FASB 606 that makes revenue recognition consistent across US industries. Most analysts track billings as a more reliable forecast and believe that the move away from billings will lead to reduced transparency on the company’s prospects.

Workday’s Product Upgrades

Meanwhile, Workday continued to improve its product offering to attract a bigger market share in the non-human capital management (HCM) segment. It has two new SKUs for the fiscal year 2018 – Workday Financial Performance Management and Workday PRISM Analytics.

Workday Financial Performance Management has been released earlier last month and it provides financial consolidation, financial reporting, and management porting. The platform includes a connector that will simplify the integration of accounting entries from third-party accounting and general ledger systems and comes with Workday planning for customers who are not yet ready to replace their legacy systems.

Workday PRISM Analytics will be delivered in the fall of this year and is an analytics platform that will provide its customers the ability to merge and analyze both Workday and non-Workday data from multiple sources. It includes a data repository that can store data, arrange governance controls, and prepare the data for analysis.

I still think that Workday is a good target for Oracle to acquire as it will give it significant marketshare in the cloud space. Otherwise, it will keep causing them headaches in competing segments including HCM and now, also, mid-market ERP.

Workday’s stock is trading at $82.89 with a market capitalization of $16.6 billion. It had reached a 52-week high of $93.35 in October last year and has recovered from the 52-week low of $65.79 in December last year.