Salesforce.com Shares Slide Despite Revenue Growth - InformationWeek
IoT
IoT
Cloud // Platform as a Service
News
5/24/2013
08:11 AM
Connect Directly
LinkedIn
Twitter
Google+
RSS
E-Mail
50%
50%

Salesforce.com Shares Slide Despite Revenue Growth

Salesforce.com CEO Marc Benioff takes the long view while Wall Street reacts to a lower-than-expected outlook.

8 Ways An SMB Makes Most Of Salesforce.com
8 Ways An SMB Makes Most Of Salesforce.com
(click image for larger view and for slideshow)
Salesforce.com on Thursday reported a 28% year-over-year increase in revenue to $893 million for its first quarter ended in April. Earnings per share on the quarter also were in line with estimates. Nonetheless, the company's stock was punished in after-hours trading because the firm's second-quarter forecast called for slightly lower earnings than financial analysts expected.

In addition to the double-digit revenue gain, Salesforce reported a 33% year-over-year gain in cash flow and a 30% increase in deferred revenue. Yet the company's stock was off more than 6% after the market close because the company expects second-quarter revenue in the range of 11 cents to 12 cents per share. Analysts were expecting at least 12 cents in the current quarter.

Measured by generally accepted accounting principles (GAAP), Salesforce lost $67.7 million, or 12 cents per share, in the first quarter, compared to a net loss of $19.5 million, or 4 cents a share, in the same quarter last year.

One reason Salesforce.com struggles with profitability is that it is making big bets that have yet to pay off. In the area of marketing, for example, Salesforce spent more than $1 billion acquiring Radian6 and Buddy Media over the last two years, yet the company's Marketing Cloud is currently a $100 million-annual-revenue business. The goal it to grow it to $1 billion, but that takes a commitment, said company CEO Marc Benioff during a conference call with financial analysts.

[ Want more on Salesforce.com marketing ambitions? Read Salesforce.com Caps Record Year, Eyes Acquisitions. ]

"When we're in quarter one, quarter two or even quarter five or six after buying a small company, that's not when we're [judging] whether it's a success or a failure," he said. "It's year three or four when we can really judge it. In our industry, people overestimate what you can do in a year and underestimate what you can do in a decade."

Benioff offered no apologies for what he described as "another great quarter" that put the company "well on its way to its first billion dollar quarter." He repeatedly referenced Gartner's recent recognition of Salesforce as the market-share leader in CRM, having surpassed SAP as the biggest seller of that application (whether on-premises or in the cloud).

Benioff also reiterated Salesforce.com's recently forged "customer company" strategy, which he said sets the firm apart from "The Windows company," "the Hana company" and "the Exadata company," his description for Microsoft, SAP and Oracle, respectively.

"We want to enable our customers to help their customers connect in a new way for sales, service and marketing on a new customer platform," Benioff said. "We have to show that we're different by taking any device that they show us, rapidly deploy an application on that device and make it world class."

One lesson for Salesforce and other tech vendors this week is that pleasing Wall Street is an exercise in managing expectations. On Wednesday, for example, Hewlett-Packard reported a slew of declining revenue figures, yet the company's stock shot up 17% on Thursday because it beat its earnings-per-share forecast by 5 cents. Salesforce, by contrast, posted a slew of highly positive revenue figures with a cautious earnings forecast just for the second quarter.

Salesforce also raised the low end of its revenue guidance for the full year to $3.83 from $3.82 billion, but it seems Wall Street is no longer dazzled by double-digit revenue gains. It's all about the profits.

Comment  | 
Print  | 
More Insights
Comments
Oldest First  |  Newest First  |  Threaded View
How Enterprises Are Attacking the IT Security Enterprise
How Enterprises Are Attacking the IT Security Enterprise
To learn more about what organizations are doing to tackle attacks and threats we surveyed a group of 300 IT and infosec professionals to find out what their biggest IT security challenges are and what they're doing to defend against today's threats. Download the report to see what they're saying.
Register for InformationWeek Newsletters
White Papers
Current Issue
2017 State of the Cloud Report
As the use of public cloud becomes a given, IT leaders must navigate the transition and advocate for management tools or architectures that allow them to realize the benefits they seek. Download this report to explore the issues and how to best leverage the cloud moving forward.
Video
Slideshows
Twitter Feed
InformationWeek Radio
Archived InformationWeek Radio
Join us for a roundup of the top stories on InformationWeek.com for the week of November 6, 2016. We'll be talking with the InformationWeek.com editors and correspondents who brought you the top stories of the week to get the "story behind the story."
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.
Flash Poll