Investors introduce Salesforce to sell-off as a service

Software as a service poster-child Salesforce.com today dished out second quarter results that showed a massive rise in revenue, which did absolutely nothing to impress investors. The CRM code shifter reported $263m in revenue, which marks a 49 per cent year-over-year rise. Net income came in at just $10m, but that's still …

[nobby]

"no software"

so, where is the IT angle?

they proudly proclaim "no software" so this has on right on an IT website :)

[Anonymous Coward]

Logic

Income and profits up over 50% - yet shares have fallen 10%. Logic anywhere?

All traders are bunch of wankers...

[Dan White]

Re: "Logic"

Could be that these traders have dealt with someone in Salesforce. I've never known such a bunch of pushy arrogant wankers.

Just 10 days into our trial of SF, we were so sick of the daily telephone calls that we switched to SugarCRM, and all has been well since :-)

[Bronek Kozicki]

@AC 07:32

I guess some shareholders expected higher profits. Share price is dictated by expectations and how they confront reality. I would blame hype around "software as service".

[Nick Sellors]

MS CRM4

I guess it'll be interesting to see what happens now that MS are taking them on through their partners with hosted CRM4

[Norfolk Enchants Paris]

Rubbish returns

$10m profit on a quarter billion dollars turnover? That's rubbish. No wonder investors want to sell off. When are you ever going to get a decent dividend off that? Faced with those numbers, I'd be selling and taking the profit now also.

@AC - Wake up. Don't blame "the traders" for this companys dismal profit, blame the corporation. Why is the margin so slim? Why do they have 2600 staff? That's not vey lean...

If you have $1m invested, for it to be an investment worth having you need it to provide a rate of return greater than you can get in a safe investment - say a bank or government bonds. Then you add in a margin for the risk you take. Given that I could get 6% on government bonds, I'd be looking for a return of about 9 - 10% from a software company. Imagining that they gave away all of their profits as a dividend, they would give $40m / 180m shares, or $0.22 per share. If I had bought $1m worth a year ago, I would have about 30000 shares, giving me a total of $6600 from my million bucks, which equates to a 0.65% return on investment. Factor in inflation and I'm losing money, so my only recourse to profit is capital gain on the share price. Because if I sell now, I'll get about $1.96million, almost 100% return on my investment.

Now do you see why they are selling?

@Bronek - I agree

[Bruce Arnold]

Is Salesforce.com the new ADP ... or the next Datapoint?

Is Salesforce.com the new ADP ... or the next Datapoint?

What will happen if blue sky clears the cloud?

***

This headline recently appeared in several places across the Web:

"Salesforce.com Passes $1 Billion Annual Revenue Mark"

THIS IS NOT TRUE. I don't know whether this material misstatement arose from media manipulation or an honest mistake, but it's genesis is most likely this 20 August 2008 press release...

"Salesforce.com Announces Record Fiscal Second Quarter Results"

http://tinyurl.com/5m5mea

...the subheading of which claims:

"First Ever Software as a Service Company to Exceed $1 Billion Annual Revenue Run Rate"

THIS IS NOT TRUE, EITHER. "Software as a Service" is marketing technospin for "service bureau". And payroll processing giant ADP--another service bureau--exceeded not only a "run rate" but actual annual revenues of $1 billion in 1985:

"The original outsourcer, Automatic Data Processing..."

http://tinyurl.com/56y5tx

Yes, SalesForce.com did report revenues of $263 million for their most recent quarter. And yes, they have raised "FY09 Revenue Guidance to $1.070 - $1.075 Billion". But NO, Salesforce.com has NOT passed the "$1 Billion Annual Revenue Mark". And despite Cheerleader/CEO Marc Benioff's effusive exuberance, some like Tiernan Ray do not share his enthusiasm:

"Salesforce's Deferred Revenue Debacle"

http://tinyurl.com/6oagtp

Perhaps in an effort to meet ever-inflating investor expectations--a fire they themselves have fueled--Mr. Ray notes that Wedbush Morgan analyst Michael Nemeroff "...thinks Salesforce may be pushing customers to sign more multi-year subscription contracts by lower prices, which could be hitting deferred revenue." And reading that, for me, brought on a disturbing case of Datapoint deja vu:

http://tinyurl.com/gk77r

"By the early 1980s, Datapoint was a Fortune 500 company. Under immense pressure to increase sales figures, its sales representatives encouraged customers to place large orders at the end of the fiscal year, permitting the company to count the orders as revenue even though the money had not been received and, in some instances, the sold equipment had not yet even been produced.... When some of the customers went broke before paying their bills, Datapoint had to reverse sales or record substantial bad debts, which caused the company to lose $800 million of its market capitalization in a matter of a few months in early 1982. The U.S. Securities and Exchange Commission (SEC) ordered Datapoint to stop this practice."

Is Salesforce.com the new ADP ... or the next Datapoint? Some say their business model is to take your watch and then bill you for the time. If so, what will happen to all those watches if blue sky clears the cloud?

Bruce Arnold, Web Design Miami Florida

http://www.PervasivePersuasion.com