Salesforce.com Reports Strong Sales, Subscriber Growth

Salesforce.com Wednesday reported profits of $5 million on total revenue of $71.9 million for its fiscal second quarter, as it continued to show strong growth in the number of customers and total subscribers that it is signing on.

The provider of on-demand CRM (customer relationship management) software picked up 41,000 new subscribers to reach a total of 308,000 subscribers, an increase of 83 percent year over year and 15 percent sequentially, company officials said.

Profits rose 331 percent year over year and 15 percent sequentially, while revenue increased 77 percent year over year and 12 percent quarter to quarter.

Subscription and support revenues totaled $65.6 million, an increase of 82 percent on a year-over-year basis and an increase of 13 percent quarter to quarter.

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The company also increased its guidance on its earnings and revenue for fiscal 2006, as it expects total sales to be in the range of $289 to $303 million and earnings per share to be in the range of 13 to 16 cents.

It also estimated that revenue for its third fiscal quarter will total $78 million to $80 million and earnings per share will range from 2 cents to 4 cents. The company has $232.7 million in cash and equivalents, up from $217 million in the previous quarter.

Salesforce.com CEO Marc Benioff said the 41,000 increase in subscribers was particularly surprising since it came after an equally strong 40,000 increase in the first quarter.

Benioff claimed the first quarter tally was “very seasonal” because it was generated largely from a backlog of deals that were closed after the end of the 2004 fiscal year.

“What we saw in our first quarter—in the February, March, April quarter—was a lot of transactions that came in from the success of our fourth quarter bookings,” he said.

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Salesforce.com didnt expect that second quarter subscriber bookings would be as robust because it didnt have a built-in backlog in the first quarter, Benioff said.

“We achieved our record subscriber number 41,000 subscribers” as a result of “large enterprise deals,” Benioff said. These include 5,000 subscriber deals from financial services firm Merrill Lynch & Co., 5,000 from insurer Aon Corp., 1,500 from commercial finance company CIT Group, 1,400 from Citizens Bank and 1,000 from Hitachi Ltd., among others, he said.

The company added a total of 1,400 customers in the quarter, and the vast majority of these are small and midsize businesses, Benioff said.

“Those customers are coming to us either because they used us in a prior business or because they heard about us from a friend or they went to one of our seminars or found us on the Web,” he said. This business is particularly strong and important to Salesforce.com, Benioff said.

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