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Salesforce Delivers on Mobile

Posted on Tuesday, Mar 4th 2014

According to a Forrester research report, worldwide IT spending is projected to grow 6.2% this year. The growth is driven by IT spending on the software segment, which will grow 7.8% this year. Forrester believes that the software market growth is attributed to spending on SaaS, mobile app development, business intelligence, and analytics solutions. As CRM provider Salesforce.com (NYSE:CRM) delivers on this trend, their stock continues to soar to new heights.

Salesforce’s Financials

Salesforce saw Q4 revenues grow 37% over the year to $1.15 billion, compared with the market’s projections of $1.13 billion. But while revenues may be growing, Salesforce has not yet converted them to profits. GAAP loss per share grew to $0.19 per share, compared with the previous year’s loss of $0.04 per share. Adjusted EPS of $0.07 fell from $0.13 a year ago but managed to exceed the Street’s targeted EPS of $0.06. The increasing losses are attributed to the continued spend on R&D and sales efforts. For the quarter, R&D expenses grew 43% to $173 million and sales and marketing expenses increased 47% to $639.8 million.

During the quarter, revenues from Subscription and Support grew 37% over the year to $1.08 billion and revenues from Professional Services and Other segment increased 43% to $70 million.

Fiscal 2014 revenues grew 37% over the year to $4.07 billion with an EPS of $0.35.

For the current quarter, Salesforce projected revenues of $1.205 billion-$1.210 billion with an EPS of $0.09-$0.10. The market was expecting revenues of $1.19 billion with an EPS of $0.10 for the quarter. Salesforce projected to end the current year with revenues of $5.25 billion-$5.30 billion, an impressive 30% growth over the year. The market was looking for revenues of $5.21 billion for the year. Salesforce expects to deliver an adjusted EPS of $0.48-$0.50 for the year compared with the the Street’s expectations of $0.50.

Salesforce’s Mobile and Cloud Growth

In response to the market trend, Salesforce continued to grow their mobile offerings. Their recently released mobile app development platform, Salesforce1 has seen tremendous growth. Since its launch last quarter, more than 250 Independent Software Vendors (ISVs) have signed up to build Salesforce1 apps on their AppExchange. Also, more than 30 Salesforce1 apps like Evernote and Dropbox are already live on the AppExchange. It has ten times more APIs than on their earlier development platform, Force.com and more than 1.4 million developers. As I have said before, I am bullish on the potential to generate highly profitable revenues out of this base of developer entrepreneurs by turning a large number of them into successful businesses.

Within the first month of release, the Salesforce1 Customer Platform helped drive a 96% growth in Salesforce1 mobile app active users and a 46% growth in active users of custom mobile apps. In fact, their CEO Mr. Benioff illustrated how he was able to use Salesforce1’s apps to view the analytics related to the quarter’s closing directly on his mobile phone.

They continue to expand their presence for small businesses that are able to use Salesforce’s customer service offerings through the Service Cloud with Desk.com. The recent addition of ExactTarget is also helping grow within the segment which helped them earn $95 million in revenues during the quarter.

Their stock is trading at $62.37 with a market capitalization of $37.88 billion. It touched a life high of $67.00 earlier last week.

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