Salesforce Sales Forecast Tops Estimates on Big Deals
Salesforce.com Inc. (CRM), the largest seller of online customer-management software, forecast fiscal second-quarter sales that beat estimates as it signs more large deals with corporate customers.
Sales in the period ending in July will be $724 million to $728 million, the San Francisco-based company said in a statement. That compares with an average $712.9 million analyst estimate compiled by Bloomberg. Profit excluding some items will be 38 cents to 39 cents a share, while analysts projected 38 cents.
The forecast eased investors’ concern that Salesforce’s sales reps were bringing in less revenue in comparison to the company’s hiring pace, said Pat Walravens, an analyst at JMP Securities in San Francisco.
“Salesforce has been running the same playbook now for 10 years, and during that time it has gone from a $50 million business in 2003 to around a $3 billion business today,” said Walravens, who has a “market outperform” rating on Salesforce shares. “The right thing to focus on is: Are people buying its solutions?”
Chief Executive Officer Marc Benioff is selling more expensive software licenses that let customers use the company’s entire suite of products, boosting deal sizes. Salesforce is also adding to its software for tracking sales leads and quotas with programs that manage human resources and allow companies to run marketing campaigns on Facebook Inc. and other sites.
Salesforce’s customer-support business is growing faster than its larger customer relationship management business, Benioff said during a call with analysts.
“You’re just going to see this incredible tear of that business,” he said. Larger deals are also helping lift sales, including a contract worth more than $100 million with an insurance company that was signed early in the first quarter.
“More mega-deals are being lined up for later in the fiscal year and the quantity and size could surprise people,” Mark Murphy, an analyst at Piper Jaffray & Co. in San Francisco, wrote in a May 13 research note. Murphy has an overweight rating on the shares.
First-quarter sales rose 38 percent to $695.5 million, beating the average $678 million estimate. Salesforce reported a net loss of $19.5 million, or 14 cents a share, compared with net income of $530,000, or breaking even on a per-share basis, a year earlier. Profit excluding some items was 37 cents, compared with an estimate of 34 cents.
The company raised its full-year fiscal 2013 sales forecast to between $2.97 billion and $3 billion, higher than analysts’ estimates of $2.95 billion.
Salesforce also introduced a new metric called “unbilled deferred revenue,” a non-GAAP measure of the value of contracts not yet booked as sales. The figure increased to $2.7 billion in the first quarter from $2.2 billion in the prior three-month period.
Salesforce shares fell 14 percent on May 10, the most in nearly six months after networking leader Cisco Systems Inc. said corporate customers are reluctant to spend and it’s taking longer to sign large deals.
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