Salesforce.com Earnings Beat Estimates

 
 
By Renee Boucher Ferguson  |  Posted 2007-08-15 Email Print this article Print
 
 
 
 
 
 
 

Salesforce.com added a record number of new subscribers, including thousands from several large enterprises.

Salesforce.com reported on Aug. 15 that it added a record number of customers and beat consensus estimates of total revenues and earnings per share during its fiscal 2008 second quarter. As expected from preliminary reports, Salesforce.com added a number of enterprise customers to its bottom line—a goal for the company as it looks to pad its mainly small and midsized customer roster with more global, financially able enterprise customers. Marc Benioff, Salesforce.coms chairman and CEO, outlined the customer additions for the quarter in the companys earnings call: Two customers have more than 30,000 subscribers; four customers have 20,000 subscribers; five have more than 10,000 subscribers; and 68 customers have more than 1,000 subscribers—a 40 percent increase in the number of customers with 1,000 subscribers versus six months ago.
"Nothing says more than the explosion of enterprise growth than subscriber growth," said Benioff, who only hinted at the companys biggest customer win to date, a 35,000-seat win that will be announced some time next month.
Benioff also hinted at some stress fractures in its sales and marketing organization, with a marketing consolidation, redeployed sales people and fewer new hires in the second quarter. Click here to read why analysts expected Salesforce to have a strong second quarter. Salesforce.com added more than 3,000 customers—companies versus individual users—in the quarter, which ended July 31. The additions filled out the companys bottom line to the tune of $176.6 million total revenue for the quarter, an increase of 49 percent over the same quarter last year, and a nine percent increase over the previous quarter. Thomson Financial predicted the company would bring in earnings of $174 million or one cent per share.
Saleforce.com earned 3 cents per share for its second quarter. As a result of its second quarter success, the company raised guidance for its full fiscal year 2008. Revenue is now expected to be approximately $727 million to $732 million, with earnings per share in the range of 8 cents to 10 cents. For its coming third quarter Salesforce.com said it expects revenues to be in the range of $187 to $189 million, with earnings per share coming in between 1 to 2 cents. Benioff said that one of the largest deals for the quarter was not actually the sale of the companys flagship CRM [customer relationship management] software, but rather of its platform that will include, later this year, the companys Apex development language. "One of our largest customers—35,000 customers—is the largest implementation in our history," said Benioff. "Its with the platform." Benioff pointed out that Salesforce.com started the quarter with a limited release of Apex, and the release of the companys multi-tenant platform. "For the first time customers can run their code on our servers with Apex. It allows customers to focus on innovation, not infrastructure, to build, share and deploy multi-tenant implementations," said Benioff. "For SAP, Microsoft or Oracle to adopt this model is unthinkable." Read more here a new on-demand marketplace that will compete with Salesforce.com. A triad of some of the software companies in the world, SAP, Microsoft and Oracle represent a competitive juggernaut for Salesforce—when they actually have products in the market. SAP is expected to release its A1S on demand suite geared for the midmarket later this year. Microsoft, which announced pricing for its Titan multitenant CRM release last month that vastly undercuts Salesforce.coms offerings, is also not expected to release the actual software until later this year. Oracle, which acquired Siebel Systems in January 2005, also acquired a hefty on demand CRM business with Siebel On Demand. For the moment, though, Oracle appears to be idling on the sidelines with new on demand offerings. When questioned by an analyst how one of Salesforce.coms biggest customers, ADP, could also be an Oracle on demand CRM customer, Benioff said he too was perplexed by the same question when he heard Oracle mention ADP on its last earnings call. "It also surprised ADP when I called the CEO," said Benioff. "Turns out Oracle had acquired some small company—Sterling or something—like that, that had something like 10 users. They thought that was material enough to add to their earnings call. So we feel pretty good about our ability to compete against Oracle. We follow them, SAP and Microsoft very closely, but they just arent [winning]. If they had as much code as they actually did rhetoric they might actually be doing something out there." Even with the absolutely rosy outlook, there were faint references to potential chinks in the Salesforce.com armor. When questioned how the company plans to monetize its AppExchange applications marketplace, Benioff neatly side stepped the question, as he has in the past. Analysts have pointed to a slow up tick of Salesforce.coms services outside of CRM—namely the Apex platform and cash influx from AppExchange—as potential downside risks for the company. Check out eWEEK.coms for the latest news, reviews and analysis about productivity and business solutions.
 
 
 
 
 
 
 
 
 
 
 

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