By Noel Randewich
May 23 Salesforce.com Inc's quarterly
earnings and outlook disappointed investors as costs rise
following a spree of acquisitions, sending its shares lower.
Under Marc Benioff, Salesforce's CEO and founder, the
company's fast revenue growth has made it a favorite with
investors eager to own part of the growing trend among
businesses to outsource their information technology needs -
from servers to software, a phenomenon known as cloud computing.
But Salesforce has struggled to earn consistent profits. Its
stock has underperformed the S&P 500 year to date but it still
trades at 85 times expected earnings, compared to an average of
17 for its peers.
During the quarter ending in April, Salesforce's
subscription and support costs rose faster than its revenue,
pushing its bottom line further into the red.
Moving beyond "organic" expansion of the company,
Salesforce.com made a series of major acquisitions last year
that included a $745 million deal for Buddy Media, a social
media marketing software company.
"They're moving from organic to inorganic growth. And
inorganic is very expensive," said Bernstein analyst Mark
Moerdler. "They're building out lots of sales organizations in
lots of different areas."
Inorganic growth refers to expanding through acquisitions,
in contrast to growth of existing business.
Considered the leader in cloud computing, Salesforce is
facing rising competition from Oracle Corp, SAP AG
and Microsoft Corp, which are intensely
pursuing its customers and making splashy acquisitions to match
Salesforce's product offerings.
Salesforce.com had a first-quarter net loss of $67.7 million
or 12 cents a share, compared to a net loss of $19.5 million, or
4 cents a share, in the same quarter last year.
Salesforce said on Thursday its non-GAAP diluted earnings
per share in the first quarter were 10 cents, in line with
It said it expects adjusted earnings in the current quarter
of 11 or 12 cents, also in line with expectations.
"The guidance is just in line and we're used to seeing these
guys raise," said Pacific Crest Securities analyst Brendan
Barnicle. "We see this as a buying opportunity."
Salesforce.com also said full-year EPS would be between 47
cents and 49 cents, compared to expectations of 49 cents.
The seller of on-demand business software posted fiscal
first-quarter revenue of $893 million, up 28 percent from the
It said revenue in the current quarter would be in the range
of $931 million to $936 million.
Analysts on average expected first-quarter revenue of $887
million and current-quarter revenue of $934 million, according
to Thomson Reuters I/B/E/S.
Shares of Salesforce.com fell 6.43 percent to $42.75 in
extended trade after closing down 0.20 percent at $45.69.