Salesforce.com Hits a Snag With Billing Concerns
Is Salesforce.com losing a bit of their technology prowess?
Despite being a world leader in cloud-based CRM (customer relationship management), Salesforce.com took a bit of a dive last Friday, tumbling down 10 percent despite high revenue and with earnings per share (EPS) exceeding company expectations. Analysts are beginning to think customer billing is the culprit, as it appears their numbers are not quite matching expectations.
Salesforce.com recorded billings of $566.8 million, just sky of 29 percent year-over-year growth at 28.6 percent. However, Wall Street was anticipating billings to match or exceed $586 million. Despite the number, EPS came in at $.34, and Wall Street originally estimated closer to $.31.
“While we continue to believe that Salesforce had a very solid quarter, particularly in North America, it certainly seems possible that European volatility, coupled with off-balance sheet movements, were the likely culprit behind the lower-than-expected figure” says analysts Tom Roderick and Gur Talpaz of Stifel Nicolaus.
Analysts continue to say that a significant boost in confidence within the coming quarter (about 33 percent year-over-year billings growth) will help steady the rocky tumbling. In addition, Salesforce.com expects its deferred revenue to grow 30 percent year-over-year in Q4 of fiscal 2012.
However, not all analysts completely agree the worst is over. Trip Chowdhry, managing director of Equity Research, says Salesforce.com are not in a particularly viable situation to ride out another technology or behavioral shift.
“Salesforce.com has bet its farm on multitenancy,” Chowdhry says, “However, the enterprise customers are seeing limitations of the multitenancy approach and have started to prefer a self-contained and isolated virtual machine over the multitenancy approach. …” Google and Oracle, he says, have already begun to change customer’s expectations regarding data, meaning, customers should be allowed to bring in and take out data from the cloud system as needed.
In response, Salesforce.com CEO Marc Benioff states that perhaps they are looking at the wrong metrics when analyzing the company. Benioff suggests that tracking deferred revenue, a component of billing, isn’t really the best indicator of company health. That’s because quite a few of their acquisitions, such as Radian6 technologies and Keroku, are not contributing to its deferred revenue account.
“All indications are that our business is going great,” he added.
Salesforce.com anticipates revenue to be between $2.88 billion and $2.92 billion in its fiscal 2013.
[Photo courtesy of Opening Arguments.]