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Salesforce Growth Slightly Accelerated In Q4, Driven By Nine-Digit Deals And Expanding Portfolio

CEO Marc Benioff said in the company's earnings call that a deal with consulting giant Accenture is 'having a broad ripple effect through the SI community.'

An increasingly broad and diverse product portfolio was behind the slight acceleration in growth Salesforce saw in the final three months of 2015, CEO Marc Benioff told investors Wednesday during the company's earnings call.

The period, corresponding to the fourth quarter of the San Francisco-based cloud company's fiscal year 2016, yielded $1.81 billion in revenue -- a 27 percent year-over-year climb when measured in constant currency. The financials beat analyst expectations for revenue and matched them for earnings.

"This is the best quarter we've ever seen," Benioff said. "We would never expect to see every product group, every geography and every sector of our business exceed expectations. That creates phenomenal momentum."

[Related: Salesforce Closes Another Stellar Quarter, Sets Sights On Leapfrogging SAP Next Year]

The Q4 results encouraged Salesforce to raise its forecast for fiscal year 2017 to a range of $8.08 billion to $8.12 billion, sending the stock that closed Wednesday at $62.52 to above $68 in after-hours trading.

Benioff highlighted a recent deal with Accenture as evidence that systems integrators would be wise to devote greater resources to their Salesforce practices, and to start using the company's CRM software themselves to manage customer relationships.

"There hasn't been a conversation this quarter that has not revolved around the incredible success we've had with Accenture," Benioff told investors on the earnings call.

Salesforce represents the IT consulting giant's fastest growing business unit, and Accenture has also deployed 25,000 users inside of its own company, he said.

"This is having a broad ripple effect through the SI community," Benioff told investors.

The CEO advised the channel to not only sell Salesforce's cloud apps, but to build apps on its platforms, and, like Accenture, use the product internally.

"Some SIs have not responded fast, and are getting displaced," he said.


The success of Salesforce and its most-committed partners has been a "shot across the bow of the SI community," Benioff said, promising a "broad shakeup" in the channel because of "next-generation implementations."

Keith Block, Salesforce's president and recently promoted chief operating officer, told investors that Salesforce is working to strengthen relationships with solution providers to drive further growth.

"They're a big part of our future and our ecosystem strategy," he said. "We all recognize the upper tier of these SIs are key influencers on business executives."

The IT consulting channel brings "expertise and access" to enterprises, and drives the success of customers, Block said.

Salesforce is working on "establishing a 360-degree relationship" with its partner community, he said, since "most successful SIs are the ones very focused on Salesforce and who run their business on Salesforce."

"The ones who get it are growing," Block told investors.

Salesforce ended fiscal year 2016 with $6.67 billion in revenue, a 24 percent increase from the previous year, or 27 percent in constant currency.

Accelerated growth is rare for a company of its size and position in the market, Salesforce execs noted.

Benioff attributed the surprisingly strong sales to an expanding geographic portfolio that's complemented by an ever-more comprehensive portfolio of cloud services -- sales, service, marketing, community, apps and the Internet of Things.

"When that full portfolio accelerates -- that is, they all come in in the quarter, every product in every geography, in enterprise and SMB -- then you get this kind of accelerated growth," Benioff told investors.


The quarterly results were boosted by two occurrences of an extremely rare event: the nine-figure deal.

One of those $100 million-plus engagements came from a renewal by one of the world's largest insurance companies; the other was a new transaction with one of the largest professional services companies, said CFO Mark Hawkins.

Hawkins acknowledged that sales of that magnitude are few and far between, but he said Salesforce is closing deals like those, and a "broad range of seven- and eight-digit deals," because it is taking a modern approach to selling software -- engaging line-of-business leaders instead of central IT.

The megadeals resulted from CEO-level conversations, Hawkins said. "We're in the board room."

Benioff, always quick to point out the foibles he perceives in other companies, said many competitors are focused on building apps, then making them look and work better across devices.

They're making a huge mistake, he said.

"What they should have focused on is building platforms for building apps," the CEO said. That's what Salesforce has done with its Lightning platform, giving "developers a fast, easy and low-cost way to deploy enterprise apps."

And because 72 percent of Salesforce customers still use only one of the clouds in its Software-as-a-Service portfolio, the opportunity to go "wall-to-wall with those customers" -- selling multiple clouds -- in the future promises another avenue for growth, Benioff told investors.

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