Saturday, May 25, 2013

Salesforce.com outlook disappoints, shares dip

Salesforce.com's earnings outlook for the current quarter failed to inspire investors used to strong numbers from the cloud-based business software pioneer, and its shares fell 6%.

Under Marc Benioff, Salesforce's CEO and founder, the company's fast revenue growth has made it a favourite with investors eager to own part of the growing trend among businesses to outsource their information technology needs - from servers to software, a phenomenon known as cloud computing.
But Salesforce.com has struggled to win consistent profits. Its stock has underperformed the S&P 500 year to date but it still trades at 85 times expected earnings, compared to an average of 17 for its peers.

Salesforce said its non-GAAP diluted earnings per share in the first quarter were 10 cents, in line with expectations.

It said it expects adjusted earnings in the current quarter of 11 or 12 cents, also in line with expectations.

"The guidance is just in line and we're used to seeing these guys raise," said Pacific Crest Securities analyst Brendan Barnicle. "We see this as a buying opportunity."

Salesforce.com also said full-year EPS would be between 47 cents and 49 cents, compared to expectations of 49 cents.

Considered the leader in cloud computing, Salesforce is facing rising competition from Oracle, SAP and Microsoft, which are intensely pursuing its customers and making splashy acquisitions to match Salesforce's product offerings.

In recent years, Benioff has expanded into marketing, although some investors believe that business may fall short of expectations. Through acquisitions and internal research and development, Salesforce.com has, for instance, introduced tools that automate social media ad campaigns or monitor Twitter chatter.

The seller of on-demand business software posted fiscal first-quarter revenue of $893 million, up 28% from the previous year.

It said revenue in the current quarter would be in the range of $931 million to $936 million.

Analysts on average expected first-quarter revenue of $887 million and current-quarter revenue of $934 million, according to Thomson Reuters I/B/E/S.

Salesforce.com had a first-quarter net loss of $67.7 million or 12 cents a share, compared to a net loss of $19.5 million, or 4 cents a share, in the same quarter last year.

Shares of Salesforce.com fell 6.08% to $42.91 in extended trade after closing down 0.20% at $45.69.

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