Forecasts Continued Growth After Reporting Solid Q3 Sales


Thursday Salesforce said that for the third quarter ended Oct. 31, the supplier of on-demand CRM applications and cloud computing software reported that revenue grew 43 percent year-over-year to $276.5 million while earnings increased 55 percent to $10.1 million.

Benioff and CFO Graham Smith, on a conference call with Wall Street analysts, also had a bullish outlook for the current quarter and for fiscal 2010 that begins Feb. 1. "As we look at our [financial results] fundamentals, we believe we have the right model for times like these," Benioff said.

Salesforce has "a strong business pipeline" with sales maintaining "healthy growth," Smith said. "We have not seen any dramatic impact on how customers are buying from us," he said of the faltering economy.

For the current (fourth) quarter that ends Jan. 31, Salesforce is projecting sales between $284 million to $285 million, representing growth of more than 30 percent. For all of fiscal 2010 that begins Feb. 1, the company is forecasting sales growth of approximately 27 percent to between $1.35 billion and $1.36 billion.

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Software-as-a-service proponents argue that the pay-as-you-go model of on-demand applications make them more attractive than traditional on-premise software in a down economy because they do not require a major capital expenditure, either for the software itself or for the IT infrastructure needed to run on-premise applications. Benioff called such spending "foolhardy in this environment" and he mocked Microsoft's recent offer of zero percent financing for customers of its Dynamics applications as "zero percent financing for software mega purchases."

Total sales were up 5 percent from the second quarter, however, and subscription and support revenue increased 6 percent quarter-to-quarter. Salesforce said it added 4,100 new customers during the third quarter, pushing its total to 51,800 customers.

Cash decreased $19 million to approximately $805 million, primarily due to the company's acquisition of InStranet, a knowledge management application company, and purchases of shares in Salesforce's Japanese majority-owned joint venture.

Benioff said Salesforce has hired 700 new employees through the first three quarters of the fiscal year and the company is intent on growing its market share during the current downturn.