Salesforce Revenue Tops Estimates on New Product Demand
Salesforce.com Inc. (CRM), the largest maker of online customer-management software, rose to a record high after reporting sales and profit that topped estimates as it expanded in marketing and customer-service tools.
Sales in the fiscal fourth quarter, which ended in January, increased 32 percent to $834.7 million, the company said in a statement yesterday. That compares with analysts’ average estimate of $830.9 million, according to data compiled by Bloomberg. Profit excluding certain items was 51 cents a share, exceeding the prediction for 40 cents.
Chief Executive Officer Marc Benioff is seeking to accelerate growth by pushing beyond cloud-computing software for sales management. He’s offering customer service, online marketing and human-resources software over the Web. Businesses are also signing up for bigger deals -- Salesforce sealed nine worth $10 million or more each during the quarter.
“They’re landing elephants,” said Brent Thill, an analyst at UBS AG in San Francisco who recommends buying the shares. “There’s a sense that their total addressable market keeps expanding with the marketing cloud, and the big guys, Oracle and SAP, are racing to catch up.”
Salesforce rose 6.9 percent to $180.84 at 10:41 a.m. in New York, the biggest gain in three months. The San Francisco-based company said in January it’s planning a 4-for-1 stock split to make each of its shares more “affordable and attractive” to more investors. The shares have soared almost eightfold since November 2008, while the Standard & Poor’s 500 Index (SPX) has doubled.
“Obviously people liked the quarter,” Pat Walravens, an analyst at JMP Securities LLC in San Francisco, said in an interview. “The guidance was middle of the road. What you really want to understand is how good the billings number is,” said Walravens, who recommends buying the shares.
Billings, the amount invoiced to customers and an indicator of future revenue, grew 28.5 percent to $1.4 billion in the fourth quarter, compared with the $1.28 billion average of eight estimates compiled by Bloomberg.
About 80 percent of billings in the fourth quarter were for annual contracts, compared with shorter deals the company had previously emphasized, Chief Financial Officer Graham Smith said on the call.
“No other top-10 enterprise software company is growing faster,” Benioff said on a conference call with analysts yesterday. He said Salesforce may surpass SAP AG (SAP) this year as the largest supplier of customer-management software. Salesforce plans to expand with more acquisitions to cater to chief marketing officers, he said.
“We need to buy more marketing companies, honestly” Benioff said. “We’re trying to build a muscle of Salesforce where we can talk comfortably with CMOs.”
Revenue for the current quarter, which ends in April, will be $882 million to $887 million, compared with the $886.9 million average estimate of analysts. Profit excluding certain items will be 40 cents to 42 cents a share, compared with analysts’ 42-cent projection.
For the current fiscal year, revenue will be $3.82 billion to $3.87 billion, Salesforce said, compared with analysts’ prediction for $3.85 billion.
Benioff is expanding into tools for human resources and online marketing, paying $689 million last year for Buddy Media Inc., whose software helps companies place advertisements on Facebook Inc. and Twitter Inc. Salesforce has also begun selling ads that appear alongside status updates on Twitter, one of the first companies to do so.
Salesforce is “investing for future growth” in Buddy Media, Smith said.
Salesforce, which is spending heavily on sales compensation and marketing expenses as it seeks to take advantage of growing demand for cloud computing, posted a fourth-quarter net loss of $20.8 million, compared with a $4.08 million loss a year earlier.
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