Salesforce.com growing fast, spending faster
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SaaS CRM vendor beats Wall Street's expectations with 38% revenue growth but costs grew faster, leading to $4.3 million loss
On-demand CRM provider Salesforce.com posted a $4.3 million net loss during the three months ending 31 July.
The company beat analyst estimates with a 38% year-on-year revenue increase, up to $546 million for the quarter. But the cost of those revenues rose 55% to $130 million, while operating expenses increased 53% to $441 million.
The total number of Salesforce.com's paying customers reached roughly 104,000, after the company added a record 6,300 net new customers during the quarter. That means its average revenue per customer was around $5,250, an 18% increase from approximately $4,420 in same period of last year.
The company's share price rose 7.5% following the announcement, although investment banks UBS, Susquehanna, JP Morgan, and Jefferies all cut their price targets for Salesforce.com – the optimum sale price for its stock.
A research note from JP Morgan explained that while Salesforce.com's investment in its platform might be forward thinking, the market will be sensitive to future losses. "While its current investment strategy may be viewed as prescient years from now, it will likely result in increased volatility of the shares over the next few quarters," it said.
In the earnings call after the announcement, CEO Mark Benioff revealed that Salesforce.com had signed three eight-figure deals in the quarter, including a 12,000-user contract with US General Services Administration in Boston.
"Against Oracle, we won deals including the Bank of New Zealand, Continental Casualty, JBWere, Integra Telecom and K-12," he said. "Against SAP, we won deals with Ashland, Dolby, Fujitsu and P&H Mining."
