If there is one company that has mastered the art of the cloud, it is Salesforce.com (NYSE: CRM). It recently released its fourth quarter results that continued to outpace market expectations. And, there doesn’t appear to be any slowdown in sight.
For the fourth quarter of the year, Salesforce’s revenue grew 21% over the year to $2.585 billion, above analyst projection of $2.81 billion. Adjusted EPS of $0.35 was also ahead of the market’s expected earnings of $0.33 per share.
By segment, Subscription and support revenues grew 26% to $2.66 billion, and professional services and other revenues grew 7% to $196 million. During the quarter, deferred revenue rose 28% to $7.09 billion, ahead of the market’s forecast of $6.7 billion. Its unbilled deferred revenue rose 48% over the year to $13.3 billion.
Salesforce ended the year with revenues growing 25% to $10.48 billion. Subscription and support revenues grew 25% to $9.71 billion and Professional services and other revenues grew 21% to $769 million. GAAP diluted earnings per share were $0.17, and non-GAAP diluted earnings per share came in at $1.35 for the year.
For the current year, Salesforce forecast revenues of $12.60-$12.65 billion with an adjusted EPS of $2.02-$2.04. The market was looking for revenues of $12.54 billion with an EPS of $1.74. Salesforce estimates to end the current quarter with revenues of $2.93-$2.94 billion and an EPS of $0.43-$0.44. The Street had forecast revenues of $2.9 billion with an EPS of $0.37 for the quarter.
Salesforce’s Expansion Plans
To continue to drive market expansion, Salesforce continued to enter into strategic tie-ups. Last quarter, it announced a tie-up with Alphabet that will result in the integration of Google’s G Suite and Analytics products with Salesforce’s range of cloud-based CRM products. The partnership addresses a growing need among customers – to be able to see a holistic view across Salesforce’s CRM systems and Analytics. As part of the tie-up, Google will offer a company-wide promotion to give free G Suite licenses for up to one year to all Salesforce customers that are new to G Suite. Additionally, the integration of Salesforce with Google Analytics will allow joint customers to merge sales, marketing and advertising data stored in both systems.
Earlier this year, Salesforce also strengthened its ties with IBM. The expansion of the partnership will bring together IBM Cloud and Watson services with Salesforce Quip and Salesforce Service Cloud Einstein so that companies would be able to connect with their customers and collaborate more effectively. As a part of this agreement, the AI tools of both IBM and Salesforce will work together to build custom applications that can be embedded to Salesforce solutions. These apps will help increase the effectiveness of sales teams using the applications. Users will benefit from new AI-driven recommendations for next best actions and will be able to utilize personalized, customer-triggered interactions based on near real-time interactions.
Earlier this year, Salesforce announced the acquisition Attic Labs, an open-source decentralized database. Attic Labs is known for its flagship product, Noms, that lets users replicate data and edit it offline on multiple machines. Noms is able to sync up the edits while versioning them so that edits don’t destroy previous versions of data. Terms of the deal were not disclosed. Salesforce plans to leverage Noms to extend collaboration capabilities on Quip, Salesforce’s document collaboration platform.
Questions for the Salesforce Board
Today there is an unprecedented opportunity within SaaS. Salesforce has already built critical mass for its product and is now looking to expand its product and market base. The new capabilities that the Google Analytics integration will bring to it is one innovative method of this expansion. What other innovations does Salesforce have in mind? India, especially, is full of SaaS companies with entrepreneurs and investors looking for exits. Is Salesforce looking to acquire some companies from the Indian market?
Its stock is trading at $116.25 with a market capitalization of $84 billion. It has been steadily climbing from the year low of $80.50 that it was trending at in March last year. It had climbed to a year high of $118.15 earlier last week.
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