Salesforce CEO Bullish on the Future

Despite's IPO delay, CEO Marc Benioff, in an eWEEK interview, tells why he is optimistic about the company's future. Inc. has had a bumpy ride in 2004. An IPO (initial public offering) of stock planned for March was delayed until June, as the company nearly ran afoul of federal quiet-period restrictions. Since turning public, has been hit with several shareholder lawsuits alleging misstatement of business performance, which caused the San Francisco-based companys stock price to fall. But Chairman and CEO Marc Benioff remains both bullish and defiant, extolling his companys high growth rate, increased profits and continued success with its hosted CRM (customer relationship management) application service model. Last month, Benioff discussed recent events with eWEEK Senior Writer Dennis Callaghan.

Was the IPO process a bit bumpier than you had hoped?

I think that this is a special time for business and certainly a special time for IPOs. I think its more of a reflection of the times were living in currently, especially when you have a high-profile company like a Salesforce or even what you saw with Google.

At this point, would you say going public was worth it?

Its all lemons into lemonade at this point. We are very fortunate to have completed an IPO which is still the most successful IPO of the year. We have just delivered on very strong second-quarter results—revenue gain of 88 percent and a ninefold increase in profits as well as strong subscriber and customer number additions as well as new customer editions and product editions.

One of the benefits of being public is that before I only got to talk to you, but now if people want to write about us, they write about us on a much broader basis. Theres much more transparency into our business, which builds much more credibility with our customers. Customers, the market, our competitors can see exactly how were doing.

Thats a conversation weve had, maybe what, a thousand times? Even when we were a private company, I would always tell you exactly how we were doing, the revenues, the profits, the customer numbers and the subscriber numbers, and I tried to give you the transparency and you always wrote about it.

But the reality is, on the broader stage, it wasnt as relevant to the business and financial press because we were not a public company. Now that we are, we get a broader reporting of that, and our competitors still wont say how theyre doing. … We are able to let people know, hey, the on-demand computing model looks like it has some potential. Which I think is extremely important for our industry.

Have you found the market to be overly skeptical—in particular, some of the financial analysts?

No. Most of the analysts are very, very positive. Youve probably seen the different ratings we have on our stock. Weve been on a journey. We started at zero in March of 99; we launched our product in March 2000. Today, were certainly one of the fastest-growing enterprise software companies thats publicly traded in the world. I dont know anybody whos doing more than 88 percent top-line revenue growth. So were very fortunate to be successful. Were able to promote our concept that enterprise software companies need to evolve or die.

One analyst, Donovan Gow of American Technology Research, says that you need to lower your expenses, especially your sales and marketing expenses.

I think that our top-line numbers speak for themselves. Were delivering the revenues and profits at a rate that we never have been able to before. Thats what its all about.

So with the exception of him, youre not feeling pressure to increase profits?

Is he uncomfortable that weve increased profits only ninefold?

I think hes uncomfortable with your margins.

Which are 80 percent, gross margins.

No, your net income as a percentage of revenues. He said you need to spend a lot of money to continue that top-line growth, which cuts into your margins and you cant do this forever. Thats his contention.

Were very comfortable with our revenue and profit numbers. Its growing faster than anybodys as far as I know in the publicly traded software space.

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