Deals

Salesforce.com Chalks Up Strong FY12, but Competition Looms

Salesforce.com hit it out of the park with quarterly earnings for its fiscal fourth quarter and full fiscal year, which ended Jan. 31, 2012. Total Q4 revenue was US$632 million, an increase of 38 percent on a year-over-year basis, topping the $624 million expected by analysts. For the full fiscal year 2012, the company reported revenue of $2.27 billion, an increase of 37 percent from the prior year.

Its Q1 2013 guidance was also robust, projected to be in the range of $673-$678 million, an increase of 33-34 percent, year-over-year. Salesforce.com raised its projected revenue for the full fiscal year to $2.92-$2.95 billion, an increase of 29-30 percent from the previous year.

Race for Large Deals

The company’s stellar performance can be credited in part to a series of large deals the cloud provider closed. In recent weeks, it inked a $100 million plus contract with a large insurer, CEO Marc Benioff said during the earnings call.

The company also signed signed contracts with HP, BMW and AT&T, he noted.

A Temporary Burst?

The frenetic pace of activity is likely temporary, however. Salesforce.com is racing to secure as many large deals as possible before Oracle Public Cloud goes live, according to Global Equities Research analyst Trip Chowdry, who downgraded Salesforce.com to “underweight.”

In fact, Salesforce.com may lose about one-third of its business to competition, Chowdry suggests in a research note.

Price Pressures

Salesforce.com is facing challenges in other ways, Nucleus Research Vice President Rebecca Wettemann told CRM Buyer — particularly in competing on price.

“As Oracle comes out with Fusion and Microsoft pushes Dynamics CRM, Salesforce.com will have to show why it delivers better value,” she said.

One way Salesforce.com is trying to address its higher pricing is through its recently introduced Social Enterprise License Agreement, a type of all-you-can-eat deal, noted Wettemann.

“The goal is to encourage people to try out new features such as Chatter and to extend Salesforce.com to more users within the enterprise,” she said.

Leader in Product Innovation

That said, there is little doubt that Salesforce.com is the leader in the cloud CRM space at the moment and will continue to press ahead with product innovation, Wettemann added.

“We will continue to see Salesforce.com pushing hard on the mobile front and more fully integrating what they have done with Data.com, as well as recent acquisitions.”

Salesforce.com did not respond to our request to comment for this story.

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