Salesforce may have discovered the real secret to selling customer relationship management software--by marketing directly to potential customers' chief executive officers.
The strategy must be working, because the world's largest cloud business app provider reported another impressive financial quarter Feb. 24. The numbers exceeded Wall Street estimates and caused it to raise its revenue guidance for the future--which, in turn, kicked up the stock price.
Salesforce reported fiscal Q4 2016 revenue of $1.81 billion, up 25 percent year-over-year, along with fiscal year revenue of $6.67 billion, up 24 percent year over year. Its quarterly operating cash flow of $459 million was up 38 percent year over year.
In a year in which most companies would be quite satisfied with mere double-digit or high single-digit revenue increases, Salesforce's numbers selling business software stand out as nothing but impressive.
Still, 17-year-old Salesforce is still in what is commonly known as "growth mode" -- which means investing back into the company and not turning an on-paper profit. Its net loss narrowed to $25.5 million, or 4 cents per share, in the fiscal fourth quarter ended Jan. 31, from $65.8 million, or 10 cents per share, a year earlier.
At some point, the net loss is going to reverse into black ink, although it never has in all the company's time in business. Nonetheless, the stock rose 7.2 percent to $67 in after-hours trading, based mostly on the recalculated guidance numbers.
CEO Marc Benioff said on the conference call to analysts and journalists that he never made a sales call to a CEO during his 13 years at Oracle. However, because "CEOs are taking active roles as the de facto chief digital officers within their companies, they're in on these meetings," he said.
"When I look at the largest transactions, every transaction was done with the CEO," Benioff said on the call. "I think it's really unusual, and that's why we're really selling more enterprise software than Oracle or SAP.
"This is absolutely the best quarter we've ever had."
Enterprise software sales are typically handled by CIOs, but in recent years other company department heads have been getting into the act -- especially when it comes to buying cloud software subscriptions for their employees. It's not surprising that more C-level executives -- especially the CEOs -- are also in on the decision-making for tools that often directly impact a company’s bottom line.
Benioff said Salesforce signed a pair of nine-figure deals this quarter in addition to more than 600 seven-figure deals across multiple industries. Those bolstered the company's $1.81 billion in Q4 sales.
The company also reported more than $11 billion in deferred revenue, contracts that will get into the financials in the next few quarters.