Salesforce.com Surges

• Email
• Share
• Print

With Google's (Nasdaq: GOOG) IPO extravaganza, it seems that it is the only high-profile offering for 2004. Well, there was another one: Salesforce.com (NYSE: CRM).

Much like Google, Salesforce.com builds Web-based solutions that are incredibly easy for users. In the case of Salesforce.com, it develops customer relationship management (CRM) software, which improves sales effectiveness.

And, as indicated by its earnings release last week, Salesforce.com certainly understands how to get sales -- and profits.

In the second quarter, revenues surged 88% to $40.6 million from the same period a year ago. Profits were $1.2 million, compared with break-even in the prior year's second quarter. In the quarter, Salesforce.com added 1,300 customers and 21,000 paying subscribers. In all, there are now 11,100 customers and 168,000 paying subscribers.

Such growth is out of sync with the problems in the overall software industry. Other CRM players, such as Siebel (Nasdaq: SEBL), are limping along.

Why is Salesforce.com immune? A big reason is, again, simplicity. The company designed its solutions -- from the ground up -- as a Web application that is sold as a service. By all accounts, customers are responding with open checkbooks.

Because of the recurring revenues from its business model, Salesforce.com has a large degree of visibility in its earnings forecasts. In fact, the company upped its fiscal year 2005 guidance (year ended January 31, 2005). Revenues are expected to range from $165 million to $170 million and earnings from $0.02 to $0.04 per share.

Marc Benioff, the CEO of Salesforce.com, realizes that success can be fleeting in software. So it is good that he said, during the conference call, that the company's recent IPO was the "starting line" of a long marathon.

Do you think Salesforce.com has the stamina to stay in the race? Share your views with other Fools in the Salesforce.com discussion board.

Fool contributor Tom Taulli is the author of The EDGAR Online Guide to Decoding Financial Statements . He does not own shares in any of the stocks mentioned.