Q3 results from Salesforce.com show that business is still rising at an impressive rate, but so are losses. The share price rose c2% in after hours trading following some weakening over the last few weeks as questions were asked over whether tighter spending would impact the cloud pure play. Software revenue at IBM for example is slowing despite its activity in growth areas like cloud and analytics (see here).
There is no doubting the progress Salesforce.com continues to make across multiple metrics be it revenue (up 34% yoy to $788m), run rate (over $3bn in the current FY and forecast to be close to $4bn for the next), portfolio expansion (e.g. social, HR, marketing), or the ability to attract large customers (British Sky Broadcasting will roll Chatter out to 30,000 employees). Deferred revenue, which is one of the metrics Salesforce.com measure itself is up 41% yoy to £1.29bn. Those losses cannot be ignored however. While the loss stood at a comparatively meagre $3.8m this time last year, it has shot up to $225.5m this quarter. $149m comes from a one-time non-cash tax-related charge but that still leaves a large figure behind. Acquisitions (like Buddy Media– see here) contributed to the loss but costs are still rising at an eyebrow-raising rate. Marketing and sales costs were up 41% and headcount is up 34%.
It looks like there is more to come in Europe and presumably the UK. EMEA revenue was up 41% cc, 29% reported. CEO Marc Benioff said: "It has taken us a long time to get these markets online with us, to build the distribution organisations and investing in the marketing capabilities. We're very excited about the delivery of the European business this year."
Still, Salesforce.com continues to perform, is expanding its portfolio and is increasing the pressure on software incumbents like SAP and Oracle. With its entry into HR, one of the ‘traditional’ back office enterprise application areas, here is still a lot more to come from the cloud specialist.