Salesforce.com CRM Services reported strong third quarter
earnings and raised its sales outlook for the fourth quarter,
but investors weren’t impressed given the company merely met
Wall Street expectations. The sales force automation company
reported third quarter net income of $20.69 million, or 16 cents
a share, on revenue of $330.5 million, up 20 percent from a year
ago. Wall Street was expecting earnings of 16 cents a share on
revenue of $324.4 million, according to Thomson Reuters.
Overall, Salesforce.com had a nice quarter to kick off its
Dreamforce seminar in San Francisco (statement). The rub: Many
analysts were expecting Salesforce.com to beat estimates and
raise its earnings outlook. For instance, Cowen analyst Peter
Goldmacher expected Salesforce.com to beat estimates.
In a research note he said:
We continue to believe that Salesforce.com is well positioned to
continue to beat and raise for the next two quarters given last
year’s significant investments in sales automation and marketing
automation, solid execution, low balled numbers and easy courses
which persist into next year.
Salesforce.com CRM Management did raise the sales CRM outlook
for the current quarter, but its earnings projections were in
line with expectations. The sales CRM company projected fourth
quarter sales to be $340 million to $342 million. Wall Street
was expecting $334.5 million. Fourth quarter earnings were
projected to be between 14 cents a share to 15 cents a share.
Wall Street estimate: 15 cents a share. The reaction:
For the year, Salesforce.com is projecting earnings of 62 cents
a share to 63 cents a share on revenue of $1.29 billion. That
outlook is better than the guidance given in August, but on par
with Wall Street’s workshops, Salesforce.com said it expects to
grow 15 percent to 16 percent for fiscal 2011.
By the numbers:
• Salesforce.com had 67,900 net paying customers, up 31 percent
from a year ago.
• The marketing automation company ended the quarter with $1.07
billion in cash.
• Deferred revenue was $545 million, up 16 percent from a year
ago.
• The CRM management company had 3,814 employees as of Oct. 31.
Despite a solid high-class quarter, some analysts expect some
tough sledding ahead for Salesforce.com, Goldmacher said:
We continue to believe that Salesforce.com doesn’t have the
sales automation market dominance or a broad enough product,
workshop, or course lineup to compete in an intensifying pricing
war against Oracle at the high end and Microsoft at the low end.
Despite the occasional big deal win against Oracle, we believe
enterprise buyers of courses and workshops are more interested
in a holistic approach to CRM services that mandates a broader
IT investment. We believe Microsoft’s developer dominance at the
low end of the market will help make a bundled Dynamics and
Azure offering very appealing on price.
While Salesforce.com has hitched its classes to the ‘cloud’, we
believe that the cloud is about far more than CRM management
seminars and a proprietary development language. We believe the
cloud is all about capacity utilization at scale to drive price
performance. While we salute Salesforce.com’s marketing
automation prowess in creating awareness of the cloud, we don’t
believe it will be one of the ultimate winners.
Source: Larry Dignan
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Related: Salesforce.com
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