Will salesforce.com Remain King of the Cloud?

On Thursday, salesforce.com (CRM 3.45%) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise.

Salesforce has built a name for itself with its software-as-a-service business model, which many of its rivals have used in the shift toward delivering IT services directly online rather than through physically delivered software products. But as those rivals make their own advances, Salesforce faces the challenge of continuing to grow quickly enough to justify its rich valuation. Let's take an early look at what's been happening with Salesforce over the past quarter and what we're likely to see in its report.

Stats on Salesforce

Source: Yahoo! Finance.

How can Salesforce keep up the pace this quarter?
Analysts haven't budged on their calls about Salesforce's earnings, keeping their April quarter and full fiscal year estimates the same as they were three months ago. The stock hasn't stood still, however, rising almost 8% since mid-February after taking into account its 4-for-1 split last month.

Salesforce's business model has attracted copycats even among the biggest names in technology. The president of Microsoft's (MSFT 0.60%) Office division said that he could foresee selling all of its Office software via online subscriptions to its new Office 365 suite rather than through boxed or downloadable distribution.

One interesting area that has earned Salesforce some attention recently is its Radian6 social-media monitoring service. With the AP Twitter hacking scandal last month leading to a brief stock market plunge, the stakes are higher than ever to verify reports coming from sources on social media sites. Facebook (FB +0.23%), LinkedIn, and Twitter all want to avoid having to take responsibility for -- and pay the costs of -- monitoring the veracity of claims made on their respective services, as the compliance costs would likely threaten their profitability. Solutions like Radian6 could help Salesforce earn another lucrative stream of revenue.

Yet Salesforce has already committed to the value of social networking to its future performance. Last month, it unified its marketing cloud services under the social.com domain, which it paid $2.6 million for two years ago. By offering clients an easy interface to build and maintain ad campaigns for Facebook and Twitter, Salesforce hopes to tap into more of the stratospheric growth in social advertising. Meanwhile, Salesforce has also embraced the mobile side of the business, with its new mobile-app development platform offering a chance for Salesforce clients to connect better with their own customers through their smartphones and tablets.

In Salesforce's quarterly report, look to see whether the company can once again deliver surprisingly strong growth. Time after time, the company has defied short-sellers by maintaining its growth pace, and despite reasons to be cautious, betting against Salesforce in the past has been a losing proposition.

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