Salesforce To Debut Free Version Of Chatter At Dreamforce

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CEO Marc Benioff said the free version would be a "virally based product" that will operate within existing customers' networks. He said it's already being used by test customers and will be made available to all customers shortly.

Benioff's comments came during a conference call with financial analysts Thursday to detail the company's third-quarter financial results. For the quarter ended Oct. 31 Salesforce reported sales of $429.1 million, up 30 percent from $330.5 million in the same quarter last year. But net income grew only 4 percent to $22.4 million from $21.4 million one year earlier.

The CEO said more than 60,000 of Salesforce's 87,200 customers are now using Chatter. Salesforce turns the Chatter service on at no extra charge for users of the company's CRM application and charges $15 per user, per month to expand Chatter to users within customer organizations who don't use other Salesforce apps.

Salesforce did not disclose how much revenue Chatter is generating in such fees. But Benioff called that question "immaterial" because he said the application is strategic to Salesforce's future given that it expands the company's presence within businesses and makes the company's offerings "stickier. It's not just a tactical product," he said.

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Benioff, responding to an analyst's question, said customers are adopting Chatter as a replacement for older technologies such as IBM Lotus Notes. "It was a great product for its time [but] IBM has done a terrible job in terms of keeping it fresh." He went on to criticize IBM's software strategy overall, saying it "had to move to an acquisition strategy because they let these core franchises erode. They turned them into cash cows and now they're getting trampled by these next-generation products. It's just junk."

"And I think [Microsoft's] SharePoint is very much the same thing," he continued. "It's kind of the grandmother's attic. Customers throw everything into it, [then] they can't find it and they don't know what's up there, and they don't know how to get it out. It's a joke." Chatter is superior, he said, because it's "integrated with the data" and is dynamically refreshed as data changes.

Hiring, Dreamforce Spending Cuts Quarterly Operating Income

CFO Graham Smith said Salesforce's operating income was reduced by spending to support the company's rapid growth, including "accelerated hiring" of more than 300 net-new employees during the quarter, commission bonuses, and spending for next month's Dreamforce conference that's expected to draw as many as 25,000 attendees.

The company is also building additional data centers, including two in the U.S. and one in Japan, to support its growth projections. Earlier this month the company spent $278 million to purchase 14 acres of property in San Francisco where it plans to build a new headquarters campus totaling almost 2 million square feet of office space.

For the current quarter Salesforce forecasts revenue between $447 million and $449 million, with sales for all of fiscal 2011 reaching $1,647 billion to $1,649 billion. For fiscal 2012 Benioff said revenue would exceed $2 billion.