With about $500 million in revenues, Salesforce.com (NYSE:CRM) is the leader in the Next Big Thing in its industry: on-demand software. Basically, this uses the Internet to deliver software as a service.

Salesforce isn't the only company enjoying success with on-demand. Other companies -- such as RightNow (NASDAQ:RNOW), NetSuite, and Taleo (NASDAQ:TLEO) -- are also seeing lots of traction.

Still, it was no surprise that 2006 was a banner year for Salesforce. Let's take a look at why.

In the fiscal fourth quarter, Salesforce posted a 67% increase in sales to $91.1 million. Net income was $5.9 million, or $0.05 per share, which was up from net income of $3.6 million, or $0.03 per share, in the same period a year ago.

As for the fiscal first quarter, sales increased 63% to $104.7 million. In fact, this was a milestone -- Salesforce became the first on-demand software company to exceed the $100 million mark (it was two years before that the company had its first $100 million year).

Despite the success, there were some issues. For instance, the company's website experienced several outages. But management took quick action to improve its system and even launched a website to monitor the performance in real time.

Sales, sales, sales. Again, that was the story for the fiscal second quarter, in which sales increased 64% to $118 million. Moreover, the subscriber count increased 57,000 to 501,000. Part of the success came from snagging big-time customers, such as Bear Stearns (NYSE:BSC), Hitachi (NYSE:HIT), and New York Times (NYSE:NYT).

Of course, the growth continued into the third quarter, with revenues surging 57% to $130 million. Operating cash flows were $31 million, which was a 25% increase over the past year.

The company also announced a new programming language, Apex. This allows customers to build their own on-demand applications, which should further strengthen Salesforce's market position.

The Foolish bottom line
Year to date, Salesforce's stock has increased from $34.39 to $39. But in between, there were some wild swings, with the stock falling as low as $21 and going as high as $44.

What's the take from the Motley Fool CAPS community? Here's a look:


CAPS Rating * (out of five stars)

Total Bulls


Total Bears


Bull Ratio


Bear Ratio


In short, there's a lot of negative sentiment. Also, the top players are definitely bearish, with 22 outperforms and 33 underperforms. Then again, Salesforce.com does have a price-to-sales ratio of 9 times.

Here's analysis from CAPS player carbonchristalme:

"I have been very pleased with my share performance so far. They are introducing new technologies every day. We ran a rollout of this system. It took a fraction of the time it takes to roll out any other software we have used in our company. In fact we have never had a software roll out take such a short time. What makes this most amazing is that it is used by nearly everyone in the company."

For further Foolishness:

Check out the other companies featured in "The Motley Fool's 2006 in Review and 2007 Preview" special (and read a prediction for Salesforce in 2007).

If companies like Salesforce.com excite you with their rule-breaking ways, you might be interested in our Rule Breakers newsletter, too. Our guide to the market's best iconoclasts is beating the S&P 500 by 7.9 percentage points, and a free 30-day trial is yours for the asking.

Fool contributor Tom Taulli does not own shares mentioned in this article. He is currently ranked 651 out of more than 18,000 players in CAPS. New York Times is an Income Investor pick. The Fool has a disclosure policy.