Marc Benioff has Swagger, but what about that Salesforce.com income statement? – TechCrunch

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Salesforce.com CEO Marc Benioff is a charismatic guy for someone who runs a business that serves the heavy corporate world. It is so well known that it was staged last week in Las Vegas to give a speech at CES, the world’s largest consumer electronics show. Let me say it again: one type of business gave a speech at the world’s largest consumer gadget trade fair. This must be a first.

But there is something that torments me about Benioff. Despite all of its bragging and vision for the future, Salesforce.com’s income statement shows a huge loss. And so, even though I think of Salesforce.com as an innovator, I still stick to what the numbers say. Partly for my own benefit, I took a look at the company’s financials and what others are saying about Benioff. I did this because I sense some risk Salesforce.com is taking in posting such a loss. Of course the swordsmen will say, “But my mate, this is the land of pirates and villains – risk is part of sword fighting.” Here, have a whiskey.

The worst thoughts I have are that Benioff Castle will collapse if the tide doesn’t turn and investors are in trouble. “Get off the plank of my billion dollar sailboat, you dumb jerk, Larry’s back to buy you.” Or do you want to face the sharks? They can smell you from here. How about a dime for what is worth a dollar? “

Creative licensing isn’t just for savvy journalists, it’s also a game we love to play. It’s not an entirely far-fetched scenario for a company’s actions to take a beating. It’s clear. Salesforce.com, however, has many supporters, including Motley Fool, who is bullish on Salesforce.com. It might sound ugly, but not everything is what it seems:

SalesForce.com is a battleground stock with a lot of hype and even more hate. But even enemies cannot deny that SalesForce.com has provided its investors with huge returns over the past few years. Investors often look at the company’s earnings and wonder how the heck this stock price keeps going up. The answer is simple: they continue to increase cash flow from operations. On the income statement, a large portion of their income is deferred over the term of the contract, while they still incur marketing and overhead costs immediately. All of that (plus their extremely high spending on marketing) makes for a lousy income statement. But their cash flow and rapidly growing market share is magnificent.

Yes, its revenues testify to the success of the SaaS model, the dynamism of Benioff and a coherent corporate culture. Revenue continues to climb from around $ 1 billion in 2009 to $ 2.25 billion in 2012. But in turn, Salesforce.com’s net income fell from $ 80 million in January 2010 to a negative of $ 220 million as of October 31, 2012.

Here’s a look at Seeking Alpha:

phasforce research

Salesforce.com doesn’t expect to turn a profit for the foreseeable future, according to a 10-Q filed in the fall, as pointed out in a Forbes article by Jeff Bailey, editor of YCharts:

We have incurred net losses in each quarter since July 31, 2011. In addition, we expect our costs to increase as a result of decisions made to our long-term profit, such as stock awards and business consolidations. companies. If our revenues do not increase to offset these expected cost increases, we will not be able to return to profitability and we may continue to experience net losses under US GAAP.

Revenue continues to grow, but you also need to consider what it costs the business to do. Marketing costs now represent more than 50 percent of revenues. And the company continues to hire. As of January 31, 2012, Salesforce.com had 7,785 employees, up from 5,306 a year earlier. In its call to investors in late November, Salesforce.com said it added more than 550 new employees in the third quarter, including around 250 people from its acquisition of Buddy Media. This brings its total workforce to more than 9,300, up 34% from the third quarter of last year.

CRM Chart

CRM data by YCharts

Meanwhile, Benioff bragged on CNBC Wednesday that the company had made billion dollar acquisitions. Still, he now faces an even tougher battle with Oracle, which last month acquired Eloqua, a marketing automation company. Salesforce.com should now be looking for an acquisition of its own. The problem? Salesforce.com does not have the cash reserves that Oracle has. To be sure, Oracle is a much more established company, with $ 45 billion in major acquisitions in recent years.

Salesforce.com painted a very different picture in its third quarter earnings call. He highlighted its growth and the historic strength of its fourth quarter. The company expects revenue in the range of $ 825 million to $ 830 million for about 31% year-over-year growth. For the full year, Salesforce.com is between $ 3.04 billion and $ 3.05 billion. Preliminary estimates for fiscal 2014 are in the order of $ 3.8 billion to $ 3.85 billion in revenues.

So what is wrong here if something?

Las Vegas is built on the illusion of America. It comes from the belief that the future is paved with gold. Benioff sells this dream every day. He masters the language of “social” and “cloud” which resonates with companies. He talks about connecting businesses with Facebook and Twitter. How social technologies will change every business. But its CRM business is still its bread and butter, and CRM is now considered a fairly mature category. Social CRM is the new game from Salesforce.com. It sounds good, but the cost of selling is considerable.

I know a lot of smart people at Salesforce.com. I love his platform game and the way he builds a community of developers. But also, Benioff doesn’t have all the answers and should be viewed with skepticism even though he’s a corporate guy who can wow a crowd of consumer electronics.


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