Don't overpay for (NYSE:CRM). You're better than that.

Great company? You bet. It's the leader in Internet-based customer relationship management applications. It's growing its subscriber base at a healthy clip. On any given weekday, it processes nearly 100 million transactions.

Bad stock? Indeed. The share price is outlandishly high for a company with meager profitability, decelerating top-line growth, and a future of head-on collisions with wealthier software companies.

Let's tackle some of those knocks. True, investors aren't buying into Salesforce for bottom-line bliss. The company simply broke even last year, as healthy subscriber gains failed to offset thinning profit margins and hefty stock-based compensation charges. The company actually posted an operating loss last year, spared the red ink only by the passive mercy of its interest income.

The future won't get a whole lot brighter. Salesforce earned a penny per share this past quarter. The company is guiding investors to expect a profit of $0.07 to $0.09 per share for all of fiscal 2008. I'm not all that comfortable paying 500 times forward earnings. Sure, the multiples are kinder on a cash flow basis, but this stock's ultimately valued at a significant premium to its industry, and to other companies growing at similar clips.

Speaking of growth pace, let's get into the decelerating revenue gains at Salesforce. Bulls often write off the company's paltry profitability as a price that must be paid for aggressive expansion. The company continues to win many prized corporate accounts, which is all well and good. However, as it continues to mature, its growth spurts keep getting smaller.

Revenue Growth

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See the trend? It will continue. The company expects to generate between $722 million and $728 million in revenue this year. So this year's top-line growth will clock in no higher than 46%. That amounts to a less than 43% advance over the final three quarters of fiscal 2008, for those scoring at home.

Waiting for the wave
Web-based applications aren't perfect. Even the mighty Salesforce suffers through spells of performance degradation, scheduled maintenance downtime, and sporadic outages. It hasn't been enough to send clients scrambling for traditional software solutions, but it isn't stopping the competition from smelling an opportunity to topple the market leader.

Oracle (NASDAQ:ORCL), SAP (NYSE:SAP), and Microsoft (NASDAQ:MSFT) are all looking to grow in the on-demand CRM software market Salesforce pioneered. Oracle is a feisty one, with CEO Larry Ellison filing to take his majority-owned NetSuite -- a smaller on-demand rival of Salesforce -- public earlier this week.

You didn't think that conventional enterprise-software giants would just ignore Salesforce, did you? Even an ally like IBM (NYSE:IBM) or Google (NASDAQ:GOOG) can turn on it. Web-based software is more than a novel pursuit at Big G. Google Apps and Sun Microsystems' (NASDAQ:SUNW) StarOffice tackle spreadsheets, word processing, and email via the Web; making the leap to meatier CRM applications is a logical next step.

So where will the bulls be when Salesforce's growth matures? At that point, the company would normally bump up its subscription rates to provide the elusive profits that shareowners have craved. Unfortunately, its hands will be tied, surrounded by deep-pocketed rivals with money to burn and Web-based applications to mark down. If you think margins are tight now, just wait until the cutthroat future of tomorrow.

A company like Google can subsidize on-demand business software through online advertising. Giants like Oracle and Microsoft have other software gravy trains to ride. What will Salesforce do when it finds that it is no longer growing, nimble, or alone?

The obvious answer is that Oracle will buy it out. Salesforce seems to be following in the footsteps of Siebel Systems. Both companies were founded by former Oracle executives, and both got off to strong Oracle-rattling starts. Oracle snapped up Siebel two years ago, after waiting until Siebel shares were depressed enough to make the move.

If history repeats, the exit strategy is several downticks away. Do you really want to wait for that? As I said before, don't overpay for today. You're better than that.

Think you're done with the Duel? Think again! Go back and read the other entries, share your opinion on Motley Fool CAPS, then vote for the winner.

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Longtime Fool contributor Rick Munarriz wonders if being an ex-Oracle exec is the key to launching a popular software upstart. He does not own shares of any of the companies in this story. The Fool has a disclosure policy.