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 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 (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 by e-mail. “We wish him all the best in his future

Cakebread, who was chief financial officer at 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

“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

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
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

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.

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