UPDATE 3-Salesforce.com results beat Street

Tue Nov 20, 2012 8:31pm EST

By Gerry Shih

Nov 20 (Reuters) - Business software provider Salesforce.com Inc beat Wall Street expectations for the third quarter and maintained its earnings outlook for the rest of its fiscal year despite the uncertain economic outlook.

The company said it seemed to have weathered the effects of Superstorm Sandy and fears among its clients surrounding the "fiscal cliff" as it projected sales for the current quarter, ending Jan. 31, of between $825 million and $830 million, roughly in line with analysts' average forecast of $829.9 million.

The fiscal cliff refers to U.S. government spending cuts and tax rises due to be implemented under existing law in early 2013 that may cut the federal budget deficit but also tip the economy back into recession.

Shares rose 1.8 percent to $148.59 in extended trade.

"In light of the macro environment and a pretty poor third-quarter for tech and software companies, investors have to be pleased," said Israel Hernandez, a managing director at MKM Partners. "Salesforce is looking at momentum across its various businesses and feeling very good about the trajectory to guide the way they did."

Salesforce, which sells marketing and sales services to companies like Kimberly-Clark Corp and General Electric , has seen its shares soar 44 percent this year, although they have sagged in recent weeks, along with the wider Nasdaq index, on doubts whether businesses will pull back on information technology spending.

But analysts say CEO Marc Benioff appears to have buttressed his company's market position by expanding Salesforce's product offerings before the end of the year, when major companies typically renew their IT contracts.

Founded in 1999 as a sales management software provider, Salesforce now also offers human resource management tools. In recent months, Benioff has been aggressively acquiring companies and pitching a newly expanded suite of social media products, dubbed "Social Enterprise," which, for example, lets companies track what customers are saying about them on Twitter and Facebook.

Benioff told analysts on a conference call on Tuesday that Radian6, a company acquired by Salesforce in 2011 for $326 million, will generate more than $100 million in revenue next year.

"We've moved successfully from a single product company to a multi-product company," Benioff said.

Next year, he said, Salesforce will continue to integrate its recent acquisitions - including social marketing company Buddy Media, Salesforce's largest deal to date, for $689 million - and further promote its platform so that third-party developers will write programs for Salesforce products.

Salesforce, whose shares trade at nearly 100 times projected earnings versus 36 times for the software sector, gave its first forecast for its 2014 fiscal year on Tuesday, projecting revenue between $3.8 billion and $3.85 billion, in line with analysts' average estimate of $3.83 billion.

The company will likely be hotly pursued by larger enterprise computing giants like Oracle and SAP AG , which have scooped up smaller companies and rolled out new features to compete with Salesforce.

At an event in Madrid earlier this month, SAP unveiled a new customer relationship management offering dubbed "360 Customer," which was viewed as the German software giant's latest effort to undercut Salesforce's core business.

This year, Oracle acquired several social marketing companies to compete with Salesforce's new-look product lineup.

Benioff acknowledged to analysts Tuesday that the three companies, which all scrap over business clients, occasionally clash in "customer flare-ups" but downplayed the threat posed by his two larger rivals.

"I think Salesforce is creating some separation between itself and its competitors," said Hernandez from MKM Partners. "They just seem one, two, three steps ahead of Oracle, SAP and Microsoft."

For the third quarter, ending Oct. 31, Salesforce reported a per-share loss of $1.55 on a non-adjusted basis.

After excluding a one-time tax charge and stock-based compensation costs, the company reported earnings of 33 cents a share, a penny above analyst projections of 32 cents a share, according to Thomson Reuters I/B/E/S.

It reported revenue of $788 million for the quarter; analysts, on average, predicted revenue of $776.5 million.

By the end of the quarter, unbilled deferred revenue, a leading indicator of sales, had risen to roughly $3 billion, up slightly from $2.8 billion at the end of July, the company said.

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