Salesforce.com Quarterly Sales, Profit May Miss EstimatesJack Clark
Salesforce.com Inc. forecast fiscal fourth-quarter sales and profit and 2016 revenue that may miss analysts’ estimates amid a slowdown in corporate spending on the company’s software and services.
Sales in the period that ends in January will be $1.436 billion to $1.441 billion, the San Francisco-based company said yesterday in a statement. Profit, excluding some costs, will be 13 cents to 14 cents a share. Analysts had projected revenue of $1.45 billion and profit of 15 cents, according to the average of estimates compiled by Bloomberg.
Chief Executive Officer Marc Benioff has sought revenue growth by pushing Salesforce into new businesses, including data analytics, corporate social networks and marketing services. The company may be finding it more difficult to expand its main sales-force automation software business, because the low end of that market is dominated by rivals such as Zoho Corp. and SugarCRM Inc., said Steven Koenig, an analyst at Wedbush Securities Inc.
“I think we’re starting to see some degree of saturation,” said Koenig, who has the equivalent of a hold rating on the stock. “I don’t think the share gains going forward will be anything like the past.”
Salesforce shares slipped 4.5 percent to $58.30 at the close in New York. The stock is up 5.6 percent for the year, compared with an 11 percent gain for the Standard & Poor’s 500 Index.
In a separate filing, the company said Chief Operating Officer George Hu will take a personal leave of absence for as long as six months starting Dec. 2. Salesforce didn’t specify the reason. Hu joined Salesforce in 2002.
For fiscal 2016, which will end in January of that year, Salesforce said sales will be $6.45 billion to $6.5 billion, compared with the average analyst estimate of $6.66 billion.
In a bid to maintain the pace of Salesforce’s revenue growth, which topped 30 percent for the past three fiscal years and is projected to reach 32 percent in the current year, Benioff has moved Salesforce into new areas of business like digital marketing, via the acquisition last year of ExactTarget Inc. He also hired former Oracle Corp. executive Keith Block as president to help sell Salesforce’s broader product portfolio.
“There are probably more than a hundred competitors in the CRM market and they’re not able to deliver at the growth rate and the absolute numbers we’re putting out today,” Benioff said in an interview after the earnings report.
The CEO has inked new alliances, such as a partnership with sales and marketing services company Omnicom Group to directly link Salesforce’s technology into the tools it makes available to clients.
Salesforce may have trouble attaining the same rapid growth rate in marketing as it had in its traditional business, Wedbush’s Koenig said.
“The issue, longer-term, for Salesforce in the marketing-automation space is the space is pretty fragmented,” Koenig said. “They’re not nearly going to be the dominant vendor that they are in sales automation.”
For the fiscal third quarter, Salesforce’s net loss narrowed to $38.9 million, or 6 cents a share, from a net loss of $124.4 million, or 21 cents, a year earlier. Revenue in the period that ended Oct. 31 jumped 29 percent to $1.38 billion.
Profit excluding some costs was 14 cents a share. On that basis, analysts on average had estimated third-quarter profit of 13 cents on revenue of $1.37 billion, according to data compiled by Bloomberg.
Billings, which reflect the amount Salesforce billed customers during the quarter, rose 22.9 percent in the recent period to $1.25 billion, missing analysts’ average projection of 25.8 percent growth, according to data compiled by Bloomberg.
Subscription and support revenue increased 28 percent to $1.29 billion. Sales from professional services and other revenue climbed 33 percent percent to $95 million.
Salesforce isn’t expected to report net income for a full fiscal year until 2018, according to analysts’ estimates, as the company plows its money back into acquisitions aimed at boosting growth and new hires.