August 20, 2010 / 12:40 AM / 9 years ago

UPDATE 2-Salesforce.com raises full year outlook

* Fiscal Q2 EPS, excluding items, 29 cents, beats street

* Fiscal Q2 rev $394 mln beats Street view $384.8 mln

* Company raises full-year outlook

* Shares rise 7.9 percent after hours (Adds CEO, analysts, outlook, byline)

By Yinka Adegoke

NEW YORK, Aug 19 (Reuters) - Salesforce.com Inc (CRM.N) on Thursday posted a better-than-expected quarterly profit and raised its full-year outlook as more clients signed up for cloud-based computing services.

Shares of the company rose 7.9 percent in after-hours trading as it also reported adding 5,100 net new customers in the quarter.

Salesforce, which competes with SAP AG (SAPG.DE), Microsoft Corp (MSFT.O), Oracle Corp ORCL.O and NetSuite Inc N.N, specializes in cloud computing services which run software applications on its computer servers on behalf of clients.

The company raised its full fiscal year revenue forecast to a range of about $1.595 billion to about $1.6 billion. It raised its non-GAAP earnings per share forecast to a range of about $1.15 to $1.17 from $1.13 to $1.15.

It forecast fiscal third quarter earnings of 30 cents a share to 31 cents a share on revenue of between $408 million to $410 million.

Analysts on average had been forecasting third quarter earnings of 29 cents on revenue of $393.8 million, according to Thomson Reuters I/B/E/S.

Chief Executive Marc Benioff said on a conference call he is “very bullish” about true cloud computing increasing efficiency at low levels of costs for client companies.

“I think you’re going to continue to see strong growth, which is why we are delivering such a huge increase of our guidance in today’s call.”

Benioff said his company was benefiting from a shift by some companies away from major capital investments in technology hardware to using technology services provided by companies like Salesforce.

“All of our clouds are growing, and it’s tough to be a cloud at Salesforce because all of them are just moving so fast.”

Wall Street analysts were positive about the way the company had performed in an uncertain economic environment despite recent cautious commentary by some technology chief executives on quarterly conference calls.

“This was a really strong performance across the board. It was a great quarter that’s hard to pick at,” said Sasa Zorovic, analyst at Janney Montgomery Scott.

“What’s really showing here is that corporate America and companies across the world are moving to this compelling proposition of cloud computing,” he said.

Salesforce’s fiscal second quarter earnings, excluding items, were flat year-over-year at 29 cents per share for its fiscal second quarter ended July 31 as second-quarter revenue rose 25 percent to $394 million.

Analysts had on average expected profit of 27 cents on revenue of $384.8 million.

“The shares are up after-market based on a solid second quarter the strong outlook for the remainder of the year,” said Michael Nemeroff, analyst at Wedbush Securities.

The stock rose to $104 after-hours from $96.41 at the close.

Some investors have been cautious about Salesforce stock because it is among one of the more expensive technology stocks, trading at roughly 85 times the average analyst forecast for next year’s earnings, versus 11 times for Microsoft and 12 times for Oracle.

“A lot of people have been thinking the stock is expensive and needs to grow into its high multiples it has but they won’t have to wait too long because the cash flow was not only strong in the first half but is now expected to be strong for the rest of the rest of the year,” said Nemeroff. (Reporting by Yinka Adegoke; editing by Carol Bishopric)

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