Salesforce Revenue Jumps 25% As Enterprises Go Digital

Salesforce has reported big revenue increases for the fourth quarter and full year, citing corporate spending for enterprise apps that goes beyond IT budgets. Executives told analysts that Salesforce is more frequently dealing directly with CEOs who are spending according to digital transformation needs, not IT budgets.
10 Unique Perks At Tech Companies
10 Unique Perks At Tech Companies
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Online enterprise application platform provider has reported a fourth quarter revenue increase that the market doesn't ordinarily see in such large companies. Fourth quarter revenue grew to $1.81 billion, up from $1.44 billion during the same period a year ago -- 25%, or 27% in constant currency. 

In a conference call with analysts Wednesday, executives said that the results are remarkable, especially compared to those of on-premises enterprise application vendors such as Oracle and SAP, which are not experiencing that rate of growth.

Salesforce CEO Marc Benioff attributed the continuing revenue momentum to strength across the company's product lines, expansions to new geographies, and a full lineup of functionality within products including analytics.

[Salesforce revamped its pricing and talked about its technology roadmap recently. Read Salesforce Raises Prices, Enhances Mobile, Other Features.]

"The growth rates of Microsoft, Oracle, SAP are shrinking -- negative growth rates in many cases. And here we are at a 27% growth rate in this enterprise applications market," Benioff told analysts during the conference call. "…we believe that we're selling more enterprise apps than Oracle or SAP."

Oracle And SAP

Do Salesforce executives' claims line up with the actual results from SAP and Oracle?

SAP reported total revenue for the full year of 2015 of €20.8 billion ($22.65 billion at the exchange rate 1.089 from the last day of SAP's fiscal year, Dec. 31, 2015.)

Oracle reported quarterly revenue of $8.99 billion in its most recent quarter, representing a 6% decline compared with the same period a year ago.

Both SAP and Oracle experienced much larger rates of growth in their cloud revenues. Oracle's cloud revenue grew 26% in the most recent quarter, but still just contributed $649 million to the nearly $9 billion of reported revenue for that period.

Full year 2015 cloud revenue for SAP was nearly €2.3 billion, which the company said represented a 110% increase in cloud revenue. Yet it is still a small share of the total revenue pie of €20.8 billion. 

Salesforce Fiscal Year Numbers

For the year, Salesforce reported revenue of $6.67 billion, up from $5.37 billion the year before. Benioff said that the company would raise its revenue guidance for the first quarter to $1.895 billion and for the full year ahead to $8.12 billion.

Net Loss Narrows

Salesforce narrowed its net loss for the fourth quarter and for the full year. For the fourth quarter, the net loss was $25.5 million, compared to $65.8 million for the same period a year ago, according to the announcement. For the full year Salesforce reported a net loss of $47.4 million (or 4 cents per share), compared to a net loss of $262.7 million (or 10 cents per share) for the previous full year. Salesforce's forecast for earnings per share in 2017 is in the range of a loss of 2 cents per share to break even.

Digital Transformation Drives Salesforce Growth

Salesforce executives discussed a transformation they are seeing in their sales efforts to enterprise customers, saying that they are more frequently dealing directly with the CEO. That top corporate executive has often taken on the role of chief transformation officer or chief digital officer -- driving the process of digital transformation.

"In the last three weeks, I've had more conversations with CEOs around transformation than in my entire career over 30-plus years," said Keith Block, Salesforce vice chairman, president, and COO, and a former Oracle executive. Block was promoted to COO three weeks ago, the same day that Salesforce unveiled its product roadmap.

By unlocking the door to the boardroom and executives beyond the CIO, Salesforce has also unlocked more budget dollars, according to Block.

"IT organizations always have budgets. They typically range between 1% and 2% of the company revenues," Block said. "But what we've been able to tap into beyond those budgets are the line of business executive's budgets, and also the CEO agenda…When the priority of a company is all about growth, you find the money to make that happen."

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