Now that 2011 has passed and 2012 is upon us, it's time to evaluate the stocks you own and are interested in. Should you buy? Sell? Hold? Ignore? Today, we'll put these questions to (NYSE: CRM), a Motley Fool Rule Breakers recommendation that's also a key member of my Big Idea portfolio.

Salesforce is best known for supplying business management software over the Web. Since 1999, the company has battled and defeated threats, growing revenue an average of 27.7% annually over the past five years. New threats from Microsoft (Nasdaq: MSFT) and Oracle (Nasdaq: ORCL) aren't much different than the old, if only because they're failing to build social media elements into their offerings.

To be fair, profits have proven elusive for much of Salesforce's history due to heavy investments in infrastructure and stock-based compensation. Yet it's hard to argue with the results of those bets. Hundreds of thousands have written software for the underlying platform. Acquired talent tends to stay on and help build the business, which is growing even as Oracle is struggling to meet estimates.

Forecasts for

Median Target Stock Price $147.70
Fiscal 2012 EPS Estimate $1.33
Fiscal 2013 EPS Estimate $1.63
Expected Annual Earnings Growth, Next 5 Years 24.77%
Forward P/E 87.67
CAPS Rating (out of 5) *

Source: Yahoo! Finance.

How will 2012 go for Salesforce?
Analysts are expecting milder growth when Salesforce reports full-year results next month. Earnings are expected to improve just 9% on a 36.2% increase in revenue. But is that really so bad? Benioff has said time and again that his aim is to build a $10-billion-per-year business delivering software over the Web. Gobs of profit will follow if he's successful.

So far, the team appears to be on track. Salesforce last quarter projected it would achieve a $3 billion revenue run rate during fiscal 2013 -- mostly on the strength of more than 100,000 "core" (read: "paying") customers using the platform for sales, service, and support. Add-ons such as the Chatter social collaboration tool also appear to be helping win deals.

Yet for as well positioned as appears to be, there are no guarantees in investing. Here are three things shareholders should be watching for in the year ahead:

  • Improved sales per customer. Salesforce reported 104,000 net paying customers in the second quarter -- each responsible for roughly $5,250 in revenue. Management didn't revise those totals in Q3, suggesting relatively flat account growth coupled with drastically improved revenue. The implication? Existing clients are spending more. Shareholders should expect this trend to continue, assuming Benioff and his team are successful in selling the "social enterprise" concept he introduced last fall.
  • More integrated Chatter engagements. Benioff likes to talk up social collaboration via Chatter as a sort of gateway drug into embracing the entire Salesforce platform. In Q3 alone, he talked up big wins with Verizon (NYSE: VZ), which signed up 80,000 users, and General Electric (NYSE: GE), which added 20,000 Chatter users to help build a private network for customers. As impressive as these numbers are, what's missing is any sense of Chatter's revenue impact. That should change in 2012.
  • Outsized growth in deferred revenue. Salesforce thrives on longer-term subscription deals that demand up-front payments. As more deals get signed, the delta between checks cashed and accounting revenue booked grows wider, resulting in an ever-greater sum of deferred revenue. Look for the balance to keep growing by at least 30% in the year ahead.

Will Salesforce make good on these metrics? I think so, but I've also had my say. Let us know what you think of the stock using the comments box below.

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Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of at the time of publication. Check out Tim's web home, portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

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