Salesforce.com expects $5 billion run rate "any minute"

Profile picture for user slauchlan By Stuart Lauchlan February 27, 2014
Summary:
Even by Benioff's standards, the latest financial analyst conference call was relentlessly upbeat despite a massive widening of fourth quarter losses.

Marc Benioff
Any minute now

Salesforce.com expects to top the $5 billion run rate “any minute” according to CEO Marc Benioff as the firm bumped up its guidance for fiscal 2015 by $100 million.

In a conference call with financial analysts yesterday, the only down beats to be struck related to a sharp increase in net losses for the fourth quarter, from $20.8 million to $117 million.

That said, full year losses were down from $270 million to $232 million which is at least in the right direction (albeit with a hell of a long way to go).

Some of the headline numbers:

  • Revenue for the fourth quarter up 37% year on year to $1.15 billion.
  • Full fiscal year 2014 revenue up 33% to $4.07 billion.
  • Fiscal year 2015 revenue guidance raised by $100 million to $5.3 billion.
  • Operating expenses up year on year from $2.5 billion to $3.4 billion.

Some other stats of note:

  • More than 100 billion transactions in the quarter, up 49% year on year.
  • An average of 1.7 billion transactions every business day.
  • A reduction in attritions rate to under 10%.
  • More than 200 seven figure deals in the fourth quarter.
  • More than ten eight figure deals in the quarter.

Some Benioff observations

On the need for more service culture:

“Everybody needs a Service Cloud and everybody needs a help button on their product. A physical button or a virtual button.

“Humana, who is one of the largest healthcare providers in the US selected our Service Cloud in the quarter. They will get a service button, right inside their apps.

“We saw Philips embed a service button right on their ultrasound machine. That's obviously a huge trend.”

On the shift to mobile:

“I do not think there is any company whose enterprise software has moved as well as our has to the phone.

“Phones are getting larger, faster and that your software has to run really well on the phone and ours does and perhaps only ours does. I think that's certainly true today. I don't know for how long that will be true for but I haven't seen anyone else really deliver a vision of enterprise software on the phone.”

On the drive to win CMO mindshare against rivals like Adobe:

“CMOs are going to be spending more on technology than CIOs and I don't think that this is not a zero-sum game. I think there is plenty of room for everybody.

“I have been investing as you probably know for the last two or three years now, because we believe so strongly in this and we have bought quite a few assets and tried a lot of different things, because we had to kind of find our way through this opportunity and we certainly have done that.

“There is just no question we are number one in email marketing or number one in social listen in. We are number one in social publishing. We are number one in social advertising with social.com, which is the number one provider of services to advertisers on Facebook.

“I really think that there is plenty of room here for everybody. There is a lot of great companies out there. Adobe is a great company and we are going to be the number one marketing cloud in the world.”

On the need for more analytics:

“I am a huge believer in Big Data. I am a huge believer in analytics and reporting, dashboards.

“If you go and take a look at what we to do for customers today with our new next-generation reporting engine, next-generation dashboards, I don't think there is a company that delivers more dashboards and more reports and more analytics to customers every day than Salesforce.

“I am just able to look down and glance at my phone and I got incredible real-time analytics happening and dashboards and reports and I know exactly what's happening with the quarter.

“I think every CEO, every head of sales, every head of service, every head of marketing, manager, mid- manager needs that same capability and we are delivering that. In a social world, it shows up in my feed. In a mobile world, it shows up in my phone. In a cloud world, it shows up deeply integrated with our services.”

The reaction

Salesforce.com stock dropped a few percentage points on the announcement of the latest numbers, which Angela Eager of research house Techmarketview attributes to:

investors are getting twitchy over the level of losses at Salesforce.com, as indicated by a c2.2% drop in the share price in after-hours trading, despite posting a 33% jump in FY14 full year revenue and raising revenue guidance for FY15 by $100m to $5.3bn.

Eager sees Salesforce.com’s main challenges as including getting customers to close bigger deals with larger enterprises, although she notes that the high profile hiring of former Oracle sales exec Keith Block appears to be paying off on that front. But she cautions:

There could be a sting in the tail from large enterprise sales however, as they will drive more demand for vertical solutions, which will increase Salesforce.com’s already high cost base, and it has yet to seriously address the advanced analytics space.

Meanwhile Jillian Mirandi at Technology Business Research predicts a greater push into the cloud ERP market from Salesforce.com which she pitches as:

a massive opportunity for Salesforce.com as there are few enterprise-grade cloud-based solutions gaining traction. However, the company will face challenges as, unlike Salesforce.com’s flagship CRM product, ERP is one of the most complex applications, and an application fewer enterprise customers have migrated to the cloud according to TBR’s Cloud Customer Reports.

SAP and NetSuite are the biggest threats in the cloud-based ERP space, with SAP’s enterprise-focused Business ByDesign, and NetSuite’s mid-market success. We expect Salesforce.com to partner with large C&SI firms to begin monetizing this portfolio, should our prediction come to fruition.

Verdict

Even by the already exuberant standards of Benioff, that was a relentlessly upbeat conference call with zero point scoring against the competition. Not even a mention of Oracle or SAP.

With the $5 billion run rate now in clear sight, the upbeat mood isn’t going to fade away any time soon despite the ongoing losses.

 

 

 Disclosure: at time of writing, Salesforce.com is a premium partner of diginomica.