Earnings Evidence Of A New CRM Power - InformationWeek
Software // Enterprise Applications
06:58 PM
50% Earnings Evidence Of A New CRM Power

Company reports 77% revenue growth in its second quarter, in contrast to rival Siebel's fiscal woes.

The balance of power in the customer-relationship-management market continues to shift, with Inc. posting another record quarter Wednesday, three weeks after rival Siebel Systems Inc. fell victim to its second consecutive dismal earnings report.

Software-as-a-service pioneer Salesforce broke the $70 million quarterly revenue mark for the first time, pocketed its highest-ever quarterly profit, and pushed its subscriber tally to more than 300,000, building substantial momentum as it heads into its annual DreamForce user conference next month in San Francisco.

For the second fiscal quarter ended July 31, Saleforce reported a profit of $5.0 million, or 5 cents a share, on revenue of $71.9 million, compared with a profit of $1.2 million, or 2 cents a share, on revenue of $40.6 million for the same period last year. And the company isn't expecting its growth to slow. For the current quarter, it's expecting revenue in the range of $78 million to $80 million, an increase of 70% to 78% from a year earlier. Revenue for fiscal 2006 is expected to fall between $298 million and $303 million, an increase of more than 70% over fiscal 2005.

But the numbers don't tell the whole story. During a conference call with analysts, CEO Marc Benioff provided evidence of fast-growing interest in on-demand CRM among large companies, citing deployments during the last quarter at companies such as Merrill Lynch and Citizen's Bank, as well as an expansion of Corporate Express' deployment to 3,000 subscribers.

It all adds up to a study in contrasts. Salesforce appears to be evolving into a legitimate alternative for big corporations even as Siebel's licensing revenue bottoms out, and it's adding as many on-demand subscribers each quarter as Siebel claims in total. "They've come up with just about every tool and trick they can think of to get some of those subscribers on their side," Benioff said during the call without mentioning Siebel by name. Salesforce CFO Steve Cakebread also gave a rare glimpse into the company's retention rates, reporting that fewer than 1% of its subscribers opt out of the service each month.

Meanwhile, Salesforce continues to branch out from its CRM roots as it attempts to push the idea of an on-demand application and information-management platform. Benioff promised significant strategic announcements at DreamForce, and he said the company is making substantial investments in its data centers as it prepares to offer customers ever-larger assortments of online applications and development tools. He also indicated that the company anticipates having to eventually add data centers in Europe and Asia to accommodate anticipated growth in those markets.

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