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Salesforce.com’s Unstoppable Growth

Posted on Wednesday, Oct 1st 2014

A recent Forrester report on cloud computing estimates the public cloud services market to grow to $191 billion by 2020 from $58 billion recorded in 2013. The report estimates the growth to be driven by the growth in Software-as-a-Service (SaaS) and cloud applications to $133 billion by 2020 from $36 billion in 2013. The cloud platform segment is expected to grow nearly ten times from $4.7 billion in 2013 to $44 billion by 2020 and cloud business services will bring in the remaining $14 billion revenues in 2020.

Salesforce.com’s Financials
Salesforce.com (NYSE: CRM) recently reported second quarter results where revenues grew 38% over the year to $1.32 billion, ahead of the market’s projections of $1.29 billion. For the quarter, the company reported a loss of $0.10 per share compared with a loss of $0.12 per share last year. Adjusted earnings improved to $0.13 per share from $0.09 per share a year ago. The Street was expecting earnings of $0.12 per share and revenue of $1.29 billion.

During the quarter, revenues from Subscription and Support services grew 37% over the year to $1.23 billion and Professional services and other revenues were up 58% to $86 million.

For the current year, Salesforce.com now expects EPS of $0.50-$0.52 on revenues of $5.34 billion-$5.37 billion and become the first enterprise cloud company with annual revenues of more than $5 billion. They expect to end the current quarter with revenues of $1.365 billion-$1.37 billion and EPS of $0.12-$0.13. The market was looking for revenues of $1.37 billion with EPS of $0.13 for the quarter. The Street expected revenues of $5.33 billion for the year with EPS of $0.50 for the year.

Salesforce.com’s RelateIQ Acquisition
Earlier this summer, Salesforce.com announced the acquisition of RelateIQ, a relationship management software startup. RelateIQ is known for their relationship intelligence platform that is able to integrate Big Data from multiple applications including LinkedIn, Facebook, Microsoft Office 365, and Gmail to make contact details, calendars, and conversations accessible to the sales team on a real-time basis. The platform is able to work with unstructured data in multiple formats including audio, video, and emails to achieve this objective. Its algorithm is able to find the closest link in the sales team’s organization to a potential client, based on data collected from these applications. The acquisition cost Salesforce.com $390 million and is expected to help them enhance their apps and platform with this level of intelligence.

Salesforce.com’s Expansion
Meanwhile, Salesforce.com continued to grow organically as well. They are working on growing their international presence and recently opened their Paris headquarters to focus on the European markets. They also entered the wearables market with the launch of the Salesforce Wear initiative. Salesforce Wear Cloud is a developer pack that will let app developers create enterprise apps for all major wearable devices that will be integrated with enterprise infrastructures. Developers will also be able to build on existing mobile apps on the Salesforce1 Platform.

Their stock is trading at $57.53 with a market capitalization of $35.61 billion. It touched a life high of $67.00 in March this year.

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