Salesforce Matches Estimates on Larger Software Deals
Salesforce.com Inc. (CRM) rose the most in almost nine months after fiscal third-quarter sales beat analysts’ estimates as the software maker benefited from contracts with large corporate customers.
The shares increased 8.8 percent to $158.78 at the close in New York, for their biggest daily gain since Feb. 24. The stock has advanced 56 percent this year.
Chief Executive Officer Marc Benioff is signing bigger enterprise agreements that give customers broad access to Salesforce’s software, following the company’s Dreamforce conference in September. That’s helping to stave off competition from Oracle Corp. (ORCL), SAP AG (SAP) and Microsoft Corp. (MSFT), which are buying companies that offer business-management tools over the Internet and gaining traction in an area Salesforce pioneered.
“Do not underestimate Salesforce’s achievements,” Richard Davis, an analyst at Canaccord Genuity Inc., wrote in a research report. Sales growth in excess of 25 percent “when a company is generating more than $3 billion in revenues is unprecedented in business software.”
For the fiscal third quarter, which ended in October, sales rose 35 percent to $788.4 million, San Francisco-based Salesforce said yesterday in a statement. That beat analysts’ average $776.6 million estimate, according to data compiled by Bloomberg. Profit excluding some items was 33 cents a share, compared with analysts’ 32-cent estimate.
Billings -- the amount Salesforce charged customers during the third quarter -- rose 31 percent to $742.9 million from a year earlier. That compares with the $733.8 million average estimate of analysts.
A $220.3 million net loss in the period compared with a loss of $3.76 million a year earlier. Salesforce said it incurred a $149 million tax-related charge, while spending on marketing and sales rose 41 percent.
Salesforce, the largest maker of online customer-management software, is using its own acquisitions -- including Rypple and Buddy Media Inc. -- to expand beyond its core product into new areas such as human resources and social media marketing. Customers rent Salesforce’s products for annual fees and access them through a Web browser instead of installing programs on their own computers.
“Cloud-related companies are seeing growth hold up a lot better than other technology businesses,” Derrick Wood, an analyst at Susquehanna Financial Group, said in an interview. “Traditional tech companies are seeing a lot of deceleration in growth.”
Sales for the fiscal fourth quarter, which ends in January, will be $825 million to $830 million, Salesforce said. That compares with the $829.9 million average estimate of analysts, according to data compiled by Bloomberg. Profit excluding some items will be 38 to 40 cents a share, compared with analysts’ average 40-cent estimate.
Revenue for the 2014 fiscal year that starts in February will increase to $3.8 billion to $3.85 billion, the company said. Analysts on average predicted sales of $3.83 billion.
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