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UPDATE 3-Shares of Workday soar 72 percent in trading debut

* Workday shares reach $49.90

* IPO values company at almost $4.5 billion

(Adds background, quotes, valuation)

By Olivia Oran

Oct 12 (Reuters) - Shares of Workday Inc

, a cloud computing company that has yet to turn a profit, soared 72 percent in their market debut on Friday, giving some tech analysts and investors a sense of de ja vu and question the lofty valuation.

In the biggest tech listing since Facebook's

rocky

stock listing back in May, the Pleasanton, California-based company opened New York Stock Exchange trading at $48.05. The stock touched $49.90 after pricing shares above the expected range at $28.00.

It sold 22.75 million shares, raising $637 million.

Earlier in the week, Workday raised its price range to $24 to $26 per share from $21 to $24 per share.

The IPO values the company, founded by ex-PeopleSoft executives David Duffield and Aneel Bhusri, at almost $4.5 billion. Duffield and Bhusri left PeopleSoft following its acquisition by Oracle Corp

in 2004 for $10.3 billion.

It also makes Workday among the most richly valued of recent cloud computing IPOs, with a valuation of 22 times sales in the last twelve months.

IT software company ServiceNow

, which went public in June, was valued at roughly 14 times during the time of its IPO, while e-commerce platform provider Demandware was valued at 17 times.

"Workday can grow when it's smaller, but the question becomes when they get in excess of a billion in revenue, can they still bolt on this high growth rate to justify its valuation?" said Rick Summer, an analyst at Morningstar.

TAKING MARKET SHARE

Workday, whose software helps companies manage resources like employees, will have a dual class voting structure, with Class B shares worth 10 times the voting power of Class A shares.

Cloud computing technology, which lets customers access their data from remote servers, is thought to be faster and cheaper than traditional methods.

Companies based on this technology like Workday and Cornerstone OnDemand Inc

are grabbing market share from larger tech players like Oracle, SAP AG

and

International Business Machines Corp

as they digest recent acquisitions in the human resources software sector.

These companies are trying to tap into a market estimated to be valued at $9.5 billion, according to Forrester Research.

"There's millions of small companies who need a systematic way to manage human resources," said Charlie Smith, chief investment officer at Fort Pitt Capital Group in Pittsburgh, Pennsylvania which manages $1.3 billion. "As long as Oracle and others don't have the specific modules that a smaller business might need, there are going to be niches for players like Workday."

Gartner analyst Thomas Otter said Workday was the first real challenger to SAP and Oracle and it forced the two established companies to invest in new products.

Workday has over 340 customers including American International Group Inc

, Flextronics International Ltd

and Kimberly-Clark Corp .

Workday's business model, which relies on selling its software to customers on a subscription basis, means the company has visibility into its future revenue.

This allows potential investors to better predict growth.

"A customer will sign a three-year deal with Workday and they're going to get a monthly or annual payment for the next several years," said John Jarve, a managing director at Menlo Ventures. "The attractive thing to an IPO buyer is a recurring revenue stream."

The company's venture backers, Greylock Partners and New Enterprise Associates, are not selling any shares in the offering. Workday said it will use the IPO proceeds for expansion and working capital.

MORE IPOs, DEALS TO COME

Workday's revenue nearly doubled in 2011 to $134.4 million. Its net loss widened to $79.6 million from $56.2 million.

Workday is one of a slew of recent IPOs from cloud-based companies including ServiceNow, Demandware Inc

and Guidewire Software Inc .

These companies have all seen their shares jump in the last year, as consumer-oriented companies like Zynga

and Groupon have struggled.

Other cloud-computing based companies may look to follow in Workday's footsteps through initial public offerings of their own, said Ira Cohen, co-founder of Updata Partners which invests in software companies.

"There are a number of companies that will ride the business-to-business enterprise wave," he said. "This will hopefully open up the market for some very good companies."

Bankers have pegged cloud-based companies like Winston Salem, North Carolina-based SilkRoad Technology Inc and San Francisco-based ZenDesk and Australia-based Atlassian as potential near term IPO candidates.

Gartner's Otter expects there will be further consolidation in the market too. In less than a year SAP, Oracle and IBM have all made major acquisitions in the industry.

SAP bought SuccessFactors for $3.4 billion in cash last December, Oracle followed by acquiring rival Taleo Corp for about $1.9 billion in February and IBM snapped up Kenexa Corp

for around $1.3 billion in August.

Duffield and Bhusri's PeopleSoft was acquired by Oracle in a hostile takeover led by Oracle CEO Larry Ellison which took over 18 months.

Morgan Stanley and Goldman Sachs were the lead underwriters for the Workday offering.

(Additional reporting by Nicola Leske; Editing by Gerald E. McCormick, Peter Lauria, Phil Berlowitz and Sofina Mirza-Reid)

((Olivia.Oran@thomsonreuters.com)(646 223 6335))

Keywords: WORKDAY DEBUT/