RealTime IT News

Key Departures Shake Up Salesforce

Despite a positive third quarter and predictions of a rosy outlook for the fourth quarter as well as 2009, software as a service (SaaS) giant Salesforce.com may be facing trouble, with the departure of three senior executives.

Company President and Chief Strategy Officer Steve Cakebread is one of the three, having left February 1, according to the company's Form 8-K filing. The other two are reported to be senior sales executives at Salesforce.com (NYSE: CRM).

Salesforce's filing said he resigned for personal reasons, and the move does not involve any controversy or disagreement with the company.

"Steve did a remarkable job in his time here, putting the people and processes in place to build an outstanding company," Bruce Francis, Salesforce's vice president, corporate strategy, told InternetNews.com by e-mail. "We wish him all the best in his future endeavors."

Cakebread, who was chief financial officer at Salesforce.com from 2002 to 2006, had previously retired from the post, in 2006.

As for the other two departures, Barron's TechTrader Daily blog quoted securities analyst Patrick Walravens as saying they are the executive vice president of enterprise sales and the senior vice president of enterprise sales for the Americas.

The departures triggered rumors that Salesforce is trying to cut costs. "It is widely being speculated that the company is trying to cut costs as it is no longer confident of remaining sheltered amid the decline in corporate spending this year," said Aditi Samajpati of Zacks Investment Research on his blog.

"I think 2009 will be very difficult for Salesforce, and I expect them to have many layoffs for the next several quarters," Raju Vegesna, chief evangelist at Zoho, which competes with Salesforce in the customer relationship management (CRM) business, told InternetNews.com.

"It'll be interesting to see how their numbers will look this quarter and in the next quarter, which will be more important as enterprises tighten their budgets." Vegesna said three to four customers a day switch over from Salesforce to Zoho on average, because of pricing.

"We're about one fifth the price of Salesforce. Our CRM application is free for the first three months and costs $12 per user per month for the professional edition from the fourth user on, and they charge $65 per user per month for every user for their professional edition," Vegesna said. "Businesses are more likely to cut a $65 cost than a $12 cost."

Salesforce declined comment on reports that it was cutting down on expenditures.

If the CRM giant is really tightening its belt, that will be a marked contrast from its third quarter results and the positive guidance it gave during its Q3 earnings call in November. At that time, Salesforce reported net income of eight cents per share, beating expectations by one cent, and had record revenues of $276.5 million, up 43 percent year over year and well above the $273.6 million analysts expected.

Still, Salesforce's positive guidance for Q4 was tempered by CFO Graham Smith, who said Q1 of fiscal 2010 will be lower than Q4 of this year and Q2 and Q3 would be flat. He also said the strengthening dollar could be a problem.

News of the departure triggered a slide in Salesforce stock Friday, with shares closing down $1.68, or 5.47 percent, at $29.04. In after-hours trading, the stocks gained another four cents to hit $29.08.