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February 24, 2011, 5:43 PM EST
By Aaron Ricadela
(Updates with analyst comment in fourth paragraph.)
Feb. 24 (Bloomberg) -- Salesforce.com Inc., the largest supplier of customer-management software, forecast sales that topped analysts’ estimates as companies add staff and buy more cloud-computing services. The shares surged in late trading.
Revenue will be $480 million to $482 million in the fiscal first quarter, which ends in April, San Francisco-based Salesforce said today in a statement. Excluding some costs, profit will be 26 or 27 cents a share. Analysts had projected sales of $471.5 million and profit of 32 cents, the average of estimates compiled by Bloomberg.
Chief Executive Officer Marc Benioff is taking advantage as more businesses shift to using cloud computing, which delivers software and data as a service over the Internet, saving on hardware and labor. Companies are also hiring sales employees and investing in technology to support them, including customer- relationship management software, analysts said.
“When people add sales and marketing headcount, which they tend to do coming out of a recession, they tend to add Salesforce.com,” Pat Walravens, an analyst at JMP Securities in San Francisco, said in an interview.
Salesforce jumped as much as 9.7 percent to $147.33 after the report. The stock gained 95 cents to $134.32 at 4 p.m. in New York Stock Exchange trading. The shares have risen 93 percent in the past year.
Based on today’s closing price, Salesforce shares trade at 241 times estimated earnings, compared with an average price-to- earnings ratio of 83 for a peer group of 29 software companies, according to Bloomberg Data.
Billings Accelerate
Salesforce forecast lower first-quarter profit than analysts had predicted because it’s hiring rapidly, Walravens said. An acceleration in Salesforce’s billings -- an indicator of future sales -- is outweighing any concerns about higher expenditures, he said.
“When you’re putting up this kind of growth, I don’t think investors are going to have any problem with that,” said Walravens, who has a “market outperform” rating on the shares and doesn’t own them.
In the quarter ended Jan. 31, net income fell to $10.9 million, or 8 cents a share, from $20.4 million, or 16 cents, a year earlier. Sales were $456.9 million, compared with $354 million a year earlier. Excluding stock-based compensation and other costs, fourth-quarter profit was 31 cents a share. Analysts on average had forecast profit of 27 cents and sales of $451.4 million.
‘Upgrade Cycle’
“We are in the midst of an upgrade cycle for enterprise CRM,” Brad Whitt, an analyst at Gleacher & Co. in Dallas, said in a report to clients yesterday. “We see ample opportunities for revenue growth,” said Whitt, who recommends buying Salesforce shares and doesn’t own them.
Salesforce has completed three acquisitions this year. It bought Heroku Inc., which makes software for running applications written in the Ruby programming language over the Internet, for $212 million last month. Salesforce also acquired Dimdim, which makes software for real-time communications online, for $31 million. And earlier this month, Salesforce announced that it purchased software company Manymoon, which makes applications that help people collaborate on projects.
--Editors: Jillian Ward, Nick Turner
To contact the reporters on this story: Aaron Ricadela in San Francisco at aricadela@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net
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(Updates with analyst comment in fourth paragraph.)
Feb. 24 (Bloomberg) -- Salesforce.com Inc., the largest supplier of customer-management software, forecast sales that topped analysts’ estimates as companies add staff and buy more cloud-computing services. The shares surged in late trading.
Revenue will be $480 million to $482 million in the fiscal first quarter, which ends in April, San Francisco-based Salesforce said today in a statement. Excluding some costs, profit will be 26 or 27 cents a share. Analysts had projected sales of $471.5 million and profit of 32 cents, the average of estimates compiled by Bloomberg.
Chief Executive Officer Marc Benioff is taking advantage as more businesses shift to using cloud computing, which delivers software and data as a service over the Internet, saving on hardware and labor. Companies are also hiring sales employees and investing in technology to support them, including customer- relationship management software, analysts said.
“When people add sales and marketing headcount, which they tend to do coming out of a recession, they tend to add Salesforce.com,” Pat Walravens, an analyst at JMP Securities in San Francisco, said in an interview.
Salesforce jumped as much as 9.7 percent to $147.33 after the report. The stock gained 95 cents to $134.32 at 4 p.m. in New York Stock Exchange trading. The shares have risen 93 percent in the past year.
Based on today’s closing price, Salesforce shares trade at 241 times estimated earnings, compared with an average price-to- earnings ratio of 83 for a peer group of 29 software companies, according to Bloomberg Data.
Billings Accelerate
Salesforce forecast lower first-quarter profit than analysts had predicted because it’s hiring rapidly, Walravens said. An acceleration in Salesforce’s billings -- an indicator of future sales -- is outweighing any concerns about higher expenditures, he said.
“When you’re putting up this kind of growth, I don’t think investors are going to have any problem with that,” said Walravens, who has a “market outperform” rating on the shares and doesn’t own them.
In the quarter ended Jan. 31, net income fell to $10.9 million, or 8 cents a share, from $20.4 million, or 16 cents, a year earlier. Sales were $456.9 million, compared with $354 million a year earlier. Excluding stock-based compensation and other costs, fourth-quarter profit was 31 cents a share. Analysts on average had forecast profit of 27 cents and sales of $451.4 million.
‘Upgrade Cycle’
“We are in the midst of an upgrade cycle for enterprise CRM,” Brad Whitt, an analyst at Gleacher & Co. in Dallas, said in a report to clients yesterday. “We see ample opportunities for revenue growth,” said Whitt, who recommends buying Salesforce shares and doesn’t own them.
Salesforce has completed three acquisitions this year. It bought Heroku Inc., which makes software for running applications written in the Ruby programming language over the Internet, for $212 million last month. Salesforce also acquired Dimdim, which makes software for real-time communications online, for $31 million. And earlier this month, Salesforce announced that it purchased software company Manymoon, which makes applications that help people collaborate on projects.
--Editors: Jillian Ward, Nick Turner
To contact the reporters on this story: Aaron Ricadela in San Francisco at aricadela@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net
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