Software-as-a-service pioneer salesforce.com (NYSE: CRM) seems to have finally found its footing. After sliding for most of the first two months of this year, this Google (Nasdaq: GOOG) partner company got a big bounce after Q4 earnings in February and hasn't looked back since. Will it stop and take a peek when it reports its Q1 2009 numbers tomorrow, or just keep screaming ahead?

What analysts say:

  • Buy, sell, or waffle? Twenty-nine analysts follow salesforce.com. Fifteen of them still rate the stock a buy, a dozen say hold, and two vote sell.
  • Revenue. On average, they expect to see 45% quarterly sales growth to $235.8 million.
  • Earnings. But profits are predicted to fall 12% to $0.07 per share.

What management says:
Reviewing the fiscal 2008 landscape in last quarter's report, CEO Marc Benioff said: "There's only one way to describe both the consolidation of the industry and the growing number of companies choosing innovation, not infrastructure: The End of Software." Bold words, and the prediction for this year was nearly as bold. Benioff raised guidance, promising us more than $1.03 billion in sales this year, and $0.32 or $0.33 per share in GAAP earnings. His more immediate goals, however, are more modest: $234 million in sales and either $0.06 or $0.07 for Q1.

Now the bad news: It seems the analysts have set a trap for salesforce.com. If it merely meets its own guidance, the quarter would be judged a failure relative to the Street's expectations laid out above. To "win" tomorrow, salesforce.com must be better than its word.

What management does:
More objectively, though, things are looking better and better at salesforce.com. Rolling gross margins have risen for three straight quarters; operating and net margins, for four. The company still falls short of the gross margins posted by rivals Oracle (Nasdaq: ORCL) and Microsoft (Nasdaq: MSFT), but leads Google, IBM (NYSE: IBM), and Accenture (NYSE: ACN).

Margins

10/06

1/07

4/07

7/07

10/07

1/08

Gross

76.0%

76.1%

75.9%

76.2%

76.5%

77.1%

Operating

0.8%

(0.7%)

(0.6%)

0.2%

1.1%

2.7%

Net

1.3%

0.1%

0.3%

0.9%

1.7%

2.5%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

One Fool says:
Last quarter, I drew your attention to a bit of trivia about salesforce.com's performance -- namely, the fact that its operating and net margins were upside down. Thanks to its enormous cash hoard, and interest earned on it, the company was netting more profit than it was earning from operations. No more.

While I suspect the company might object to the terminology (seeing as how software is dead and all), as of last quarter, salesforce.com is finally earning more money from its software operations than it tucks away from interest on its accumulated wealth. While I suspect this is partly a consequence of declining interest rates, it also speaks to the growing strength of salesforce.com's business -- and that's good news for shareholders.

What did we expect out of salesforce.com last quarter, and what did we get? Find out in:

Fool contributor Rich Smith does not own shares of any company named above. Both Accenture and Microsoft are Motley Fool Inside Value selections. The Motley Fool's disclosure policy is available on demand.