Any business worth its salt aims to grow revenue every year. Some get there by lowering prices or making large acquisitions, and others simply run their business with an eye to solid growth.
These three tech companies are growing their annual sales faster than 30% right now. From hardware specialist Arris Group (NASDAQ:ARRS) to social network Twitter (NYSE:TWTR), with cloud-computing expert salesforce.com (NYSE:CRM) thrown in for good measure, you'll find some very different growth strategies.
Let's dig in.
Twitter: Social butterfly?
When Twitter reported third-quarter results recently, the microblogging service's trailing sales had more than doubled year over year.
Twitter's combined revenue for the past four quarters rose 118% from the same span reported a year ago. The network only added 23% more users over these four quarters, stopping at 284 million monthly active users. But advertisers are latching on to Twitter's eyeball-grabbing value, and the rate per thousand ad impressions rose by 83%.
This company is growing sales the old-fashioned way. Twitter is introducing its advertising tools to new geographical markets, raising ad prices due to high demand for limited advertising spaces, and growing the core network at a respectable clip. There are no game-changing acquisitions at play here, no price cuts, and generally no financial trickery. Management is simply running its core business the best way it knows how, and good results follow naturally.
It's not all wine and roses, of course. Twitter is still barely profitable, and tends to burn cash on a regular basis. The company's cash balance is rising, but only thanks to a fresh $1.8 billion long-term loan. So Twitter has a long way to go before becoming a slam-dunk place to park your retirement portfolio, but the sales trends are moving very quickly in the right direction.
Salesforce: Head in the clouds
Salesforce is moving at a somewhat slower pace than Twitter, but then we're talking about a far older and more mature business.
This company has been around since 1999, making it nearly twice as old as Twitter. With gray at the temples comes a certain gravitas, but Salesforce has plenty of gas left in its high-growth engines.
The exciting thing about this customer management software specialist isn't that its trailing revenue is growing by 37% at the moment -- it's the way Salesforce's growth is accelerating in the long run:
This company's maturity shows on the bottom line. Salesforce is growing its operating cash flow and adjusted earnings per share roughly in line with its rampant revenue increases. CEO Marc Benioff likes to point out that his company is one of the 10 largest software companies in the world -- and grows faster than any of its top-10 peers.
Acquisitions are a key piece of Salesforce's growth puzzle. Last year, for example, the company paid $2.5 billion for cloud marketing specialist ExactTarget. This deal added about $150 million of new 2014 revenue, reduced non-generally accepted accounting principles earnings by roughly $0.16 per share, and added a new operation to Salesforce's bag of tricks. It's a long-term deal that will probably prove to be worth its steep up-front sticker price -- and then some.
In the long run, Benioff is aiming for at least $10 billion in annual sales -- a target that analysts expect the company to achieve by 2019. That would be more than double the current trailing revenue flow of $4.7 billion.
Arris: Wheeling and dealing
Salesforce's buyouts might be subtle, but there's nothing understated or delicate about Arris' acquisition strategy.
When the cable industry hardware maker took Motorola's set-top box business off Google's (NASDAQ:GOOG) (NASDAQ:GOOGL) hands in 2013, the $2.4 billion agreement instantly tripled Arris' sales. Year-over-year comparisons have moved past the pre-buyout era, yet Arris still increased its sales by 32% in its latest quarterly report. Before the Google/Motorola buyout, Arris' sales growth was stuck at just 17% a year.
The deal did much more than simply increase the company's sales. Arris also increased its trailing free cash flow from $60 million to $468 million, and expanded its Rolodex with Motorola's top-tier telecom and cable customers. It's a perfectly executed game changer, and Arris shares have more than doubled since the buyout was announced.
Unlike Twitter and Salesforce, Arris sacrificd its profit margins on the altar of massive sales growth. But the drastically higher sales volumes more than make up for the lower gross margins, proving that there are many ways to skin a cat.