Salesforce Says New-Business Signings Dropped In Q1
Salesforce.com's first-quarter new-business signings came in slightly below last year's as customers took longer to sign, opted for smaller deals, and pulled back on add-ons and upgrades. And while Salesforce is still growing nicely, CEO Marc Benioff was more restrained in the comments he made to analysts than he had been after the previous two quarters.
Salesforce.com's first-quarter new-business signings came in slightly below last year's as customers took longer to sign, opted for smaller deals, and pulled back on add-ons and upgrades. And while Salesforce is still growing nicely, CEO Marc Benioff was more restrained in the comments he made to analysts than he had been after the previous two quarters.Because of that first-quarter slip in new-business signings - which Salesforce defines as incremental orders from new and existing customers, excluding renewals - the company is reducing its guidance on full-year revenue growth by 4%, Benioff said, and projecting revenue growth of 17% for the 12 months ending Jan. 31, which would total between $1.25 billion and $1.27 billion.
Benioff noted a few times that customers are spending less: "There's no doubt the IT spending environment continues to be challenged. The buying behaviors of our customers are indeed changing, as businesses look to manage their way through the challenging global economic environment," he said in comments on a quarterly call with analysts.
And while Benioff did make some specific comments about how Salesforce had a number of significant wins against Oracle, SAP, and Microsoft, he also was less contentious than he was in his call three months ago with analysts, when he hammered away at competitors by saying their models were old, slow, expensive, capital-intensive, and inflexible. This time around - and probably stinging a bit from having to admit a drop in new-business signings and a downward revision in guidance for the full year - Benioff touted the superiority of Salesforce's cloud strategy but in less belligerent terms.
"Customers are investing in our platform with clicks and code, not capital, and the momentum of this adoption reinforces our belief that we have the right products for times like these," he told the analysts on the call. "As we mentioned earlier, we're in a challenging IT spending environment, but as we listen to customers and prospects around the world, it's clear they're moving, and more willing than ever, to question the conventional client-server wisdom of major software, hardware, and data-center purchases."
Among the customers that went beyond questioning those models and signing on the bottom line for Salesforce in the quarter were the following:
--Japanese insurance giant Sompo extended its deal with Salesforce with an additional 16,000 subscribers, giving them a total of 25,000 internal users of the Salesforce unlimited edition. Sompo also purchased licenses for an additional 350,000 partner subscribers for brokers and dealers in 50,000 insurance offices across Japan. Benioff called it "a dramatic example of our ability to win in accounts that are dominated by Oracle and Microsoft."
--Japan Post added about 10,000 platform subscribers, pushing the total to 75,000 Force.com subscribers in 25,000 offices across Japan. Benioff said the deal will allow Japan Post to manage more than 20 Force.com applications that are central to converting Japan Post from a government-run to a private entity.
--Wins against Oracle: Benioff cited Sompo and Japan Post, as well as GE Capital, JM Smucker Co., Standard Bank, Pfizer, Broadcom, Canon USA, Iron Mountain, Barclays, Sanyo, P&G, and Sony.
--Wins against SAP: Benioff cited Pratt & Whitney, McKesson, Nokia, Nexis, Inverness Medical, Integris, and P&H Mining.
--Wins against Microsoft: Benioff cited Western Union, Booz Allen Hamilton, and Singapore Airport.
And in an anecdote that captured the growth-with-restraint attitude Benioff was exuding, he said the company gained 3,900 net new customers in the quarter, a 50% increase over the 2,600 net new additions from a year earlier - however, he also noted that "many of those 3,900" are starting with small deployments but "we'll hope they'll grow to become tomorrow's growth stories."
A final detail: CFO Graham Smith said the company has been rigorous in cutting expenses, particularly in the area of hiring: last year, he said, Salesforce added 1,000 employees, including 250 in the quarter ended Jan. 31. But armed with the knowledge of what was happening with customers this quarter, the company has hired only 40 people in the three months ended April 30.
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