Sometimes, I get the impression that if we would just leave investing to the elephants, our stock markets would be a lot less volatile.
Shares of salesforce.com
- The executive VP for enterprise sales.
- The senior VP for enterprise sales for the Americas.
- (See a pattern here, anyone?)
- And last but not least, president and former CFO Steven Cakebread.
As a writer, I'm going to miss Mr. Cakebread most of all -- because I'm going to miss being able to write "Cakebread" four times a year during earnings season. (In case that wasn't obvious.) Investors appear to miss him already, though, having sold off salesforce shares to the tune of 5% last week, when news of the departures first leaked out.
Elephants never forget
But here's the thing: This is not news, or at least, Cakebread's departure is not. Attentive investors will recall that Cakebread has been planning to leave salesforce for nearly three years now. Subsequent to his announced resignation in 2006, he was apparently "induced" to stay with a heaping helping of stock options and severance benefits. But I suspect his plans never actually changed -- they just got postponed while he was busy picking the lock on his golden handcuffs.
That said, while Cakebread's departure was preordained, the news of the other execs' resignations worries me a bit more. Two high-ranking departures from salesforce's, er, sales force doesn't bode well for Q4 earnings, due out some two weeks hence. In a research note on the departures last week, investment banker UBS opined that "customer churn" plus "deferrals" of business at customers large, medium, and small will cause a "continued slowdown in cash flow growth." salesforce's clients include such big spenders as AT&T
Two things, however, have me feeling optimistic about the shares. First, salesforce recently began offering all-you-can-eat contracts to large customers such as Dell
Second, while it still carries a P/E pushing 100, salesforce's enterprise value-to-free cash flow now sits below 17. That's not quite as cheap as rival software shops like Microsoft
My advice: Make like an elephant, and if bad news does break later this month, remember how truly cheap salesforce's stock has become.
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