Salesforce Raises Forecast, Beats Estimate on New Products

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Salesforce.com Inc. raised its sales forecast for fiscal 2016 a third time as revenue rose for the company’s new products.

Shares gained as much as 4.3 percent in extended trading after Salesforce said revenue for the year through January will be $6.6 billion to $6.63 billion, compared with the previous outlook of $6.52 billion to $6.55 billion.

Fiscal second-quarter sales rose 24 percent to $1.63 billion, compared with analysts’ average projection of $1.6 billion, according to estimates compiled by Bloomberg.

Chief Executive Officer Marc Benioff and President Keith Block have spent the past two years expanding into new markets with products for marketing, corporate social networks and data analytics, while also targeting the company’s Web-based technology at larger customers. The effort has led to a growth in deferred revenues as customers move to bigger contracts.

Salesforce’s success has made it an acquisition target, with the company retaining financial advisers earlier this year in response to takeover offers. Microsoft Corp. evaluated a possible bid, and Benioff and SAP SE Chief Executive Officer Bill McDermott held strategy talks last year.

“They’ve got a lot of opportunity,” said Brent Thill, an analyst at UBS AG, who has a buy rating on the stock. “You don’t want them at the top of every game because then they won’t have opportunity left.”

Shares Rise

Shares of Salesforce climbed to $70.71 in extended trading, after declining 5.9 percent to $67.82 at the close in New York. The stock has gained 14 percent this year compared with a 1.1 percent drop for the Standard & Poor’s 500 Index.

The company’s net loss was $852,000 in the quarter through July, compared with a loss of $61.1 million a year earlier, Salesforce said Thursday in a statement. Profit excluding certain costs was 19 cents a share, topping analysts’ average projection of 18 cents.

Unbilled deferred revenue, a closely watched number that indicates the amount of business booked by Salesforce, but not yet recognized, was $6.2 billion compared with $5 billion a year earlier.

The company posted growth of 40 percent in its newer service cloud business and 29 percent in marketing cloud, compared with 10 percent in its main customer relationship management business. CRM sales growth is slowing because many companies have already replaced legacy systems based on technologies such as Siebel.

There’s more room for growth in the newer markets because there are new workloads generating different demands, Thill said. Wave, Salesforce’s analytics product, has the potential to gain over time as the traditional business intelligence industry hasn’t moved significantly to the Web-based model favored by Salesforce, Thill said. “They’re ahead of the curve,” he said.

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