Salesforce Wows With Record Quarter

Salesforce.com (NASDAQ: CRM) today proved that some companies can keep growing even in these tough times.

For its quarter ending July 31, the company posted record revenue of $316.1 million, up 20 percent from a year ago. Income totaled $21.2 million, or $0.17 per share, beating Wall Street estimates by two cents, according to Thomson Financial.

“We are pleased to report record revenue and GAAP earnings per share for
our fiscal second quarter,” Salesforce Chairman and CEO Marc Benioff said in a statement.

The previous quarter’s revenue of $305 million set an earlier quarterly record for the company.

“We added 3,900 net new customers, bringing our total to more than
63,000, with our Service Cloud turning in its best quarter ever,” Benioff added.

During today’s earnings call, Benioff said that the results prove the strength of the company’s software model.

“This has been a great year for us and a great year for cloud computing because of the low risks solutions we provide,” he said. “As more companies move to the cloud, the total level of success they achieve will be higher. We will fight less about on-premises software versus cloud. We will fight instead against every company in the world as this becomes the dominant model.”

Benioff also seized the moment to talk up some recent customer wins from its three main competitors — Oracle, Microsoft and SAP. In particular, he said Salesforce took Motorola, Acxiom, Xerox, and Barclays from Oracle, and “recorded solid wins against SAP with Cardinal Health, Thomas Cook, and Lenovo.”

“Customers may [drop us and sign with a competitor] due to a low price,
but time and time again, those customers come back to us,” Benioff said.

Salesforce CFO Graham Smith added that the company was not winning customers
by discounting.

“There was no material change in price per seat,” he said.

During the quarter, Saleforce continued to spend aggressively on marketing. Sales and marketing expenses amounted to 46 percent of revenue, down from 50 percent for the same quarter a year ago. Research and development expenses amounted to 10 percent of revenues, up from 9 percent during the same quarter a year ago.

Looking ahead

The company today also raised earnings forecasts to between $1.27 billion and $1.28 billion, up from the guidance given in May 2009 of between $1.25 billion
and $1.27 billion.

The company’s balance sheet remained strong and largely unchanged during the quarter except for one item. Since February, Salesforce increased its holdings of marketable securities from $185 million to $610 million. The company did not go into detail about the purchases.

However, a clue as to the areas in which Salesforce may be investing came earlier this month, when Salesforce bought a stake in Practice Fusion, a cloud provider
of electronic health records (EHRs).

The firms did not disclose the amount of the investment.

“Bringing cloud computing to the health care industry will deliver enormous benefits for patients and physicians,” Clarence So, Salesforce’s senior vice president of strategy, said in a statement at the time.

Shares of Salesforce were up 8.27 percent after hours, trading at $50.00 at press time.

Update adds comments from today’s earnings call.