By Gerry Shih
SAN FRANCISCO Aug 29 Salesforce.com Inc
raised its fiscal 2014 sales outlook after reporting
better-than-expected revenue and earnings on Thursday,
reassuring jittery investors that the cloud software company
will continue its red-hot growth.
The company raised its full-year revenue guidance to between
$4 billion and $4.025 billion, in line with Wall Street
expectations of roughly $4 billion.
The forecast sent shares 8 percent higher after the bell to
Salesforce said second-quarter revenue rose 31 percent to
$957 million, as demand among corporate customers for
cloud-based sales and marketing software remained strong.
That translated into second-quarter earnings of 9 cents a
share, topping expectations of 7 cents, according to analysts
polled by Thomson Reuters I/B/E/S. Salesforce said it expects
earnings per share of between 32 cents and 34 cents for the full
For the current quarter, Salesforce said it expects to
surpass $1 billion in quarterly revenue for the first time in
its 14-year history.
"No other software company of our size is growing faster,"
Chief Executive Marc Benioff told analysts on a conference call.
For the past four years Benioff has consistently delivered
outsized revenue numbers but has spent lavishly to acquire -
rather than internally develop - a new array of product
In June Benioff snapped up social marketing company
ExactTarget for $2.5 billion, a significant bet that reflects
his belief that consumer brands will increasingly want software
to help them advertise on social media channels like Twitter.
The deal for ExactTarget closed in July and helped boost
Salesforce's revenue figures for the second quarter, the company
But the company's shares have fluctuated wildly in recent
quarters on fears that top-line growth may be losing steam
despite Benioff's heavy expenditures - and given rising
competition from competitors including Oracle Corp and
SAP AG. One of the core questions has been how Benioff
would integrate Salesforce's recent acquisitions including
ExactTarget and Buddy Media - a $750 million deal closed in
mid-2012 - into a comprehensive marketing suite.
Those fears have been assuaged for now, said R. W. Baird
analyst Steve Ashley.
"The Marketing Cloud has been a new unknown, and people were
wondering is it going to successfully open a new market?" Ashley
said. "Certainly people came away today feeling encouraged that
it's proceeding as expected."
Salesforce's costs remained high. Research and development
costs for the quarter rose 36 percent to $161 million, while
sales and marketing costs rose 26 percent to $480.6 million.
In June, the company reiterated its emphasis on selling its
new social marketing tools when it hired Keith Block, a 26-year
Oracle veteran, to become a corporate president leading global
sales. It also hired Tony Fernicola, another top sales executive
EMPHASIS ON EXACTTARGET
Even though he declined to answer an analyst question about
the performance of Buddy Media, another costly acquisition,
Benioff said he intended to make ExactTarget a centerpiece of
Salesforce's growth strategy. The Indiana-based company makes
software that lets marketers target specific customers with
email and social media campaigns.
Salesforce raised ExactTarget's expected contribution to the
overall topline by $20 million to roughly $140 million for the
Scott Dorsey, the ExactTarget chief executive, will now
oversee Salesforce's marketing products, Benioff said.
Benioff told analysts Thursday that he was hoping to strike
an alliance with SAP similar to the one forged with Oracle in
June. That partnership shocked Silicon Valley, given the intense
competition between the firms and personal rivalry between
Benioff and his one-time boss, Oracle Chief Executive Larry
The nine-year deal allowed Oracle and Salesforce to closely
integrate their cloud software so that their corporate customers
would not have to choose one product line or the other for every
"Certainly it's my hope that we will develop a similar
alliance with SAP," Benioff said. "It's in the interest of their
customers and our customers that Salesforce works well with
Oracle, SAP, and even works well with Microsoft because
our customers have these existing investments."