Salesforce: Profit pah! We’ll be back in the red before you know it

SAP saps soon to be slapped

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Software service slinger banked its first operating profit in 18 quarters — yes, you read that correctly — but reassuringly confirmed it will be back in the red again in the next trading period.

The cloudy-based CRM and marketing apps maker reported sales of $1.51bn for the three months ended 30 April, up 23 per cent year-on-year, causing CEO Marc Benioff to practically soil himself on a conference call.

“We’re outpacing the competition and taking market share from rivals,” said the usually shy and retiring colourful exec. “Oracle and SAP continue to fall behind,” he added, while discussing the CRN services space.

“Service Cloud displaced SAP in the quarter and is now the market share leader in customer service and support. Sorry about that, SAP,” he said.

Sales Cloud was up 9.3 per cent to $630.4m, and Service Cloud jumped 37 per cent to $407.7m. Similarly, Salesforce Platform was up nearly 36 per cent to $224m and Marketing Cloud grew 29 per cent to $143.2m

The company upped turnover in all regions but the Americas, followed by Europe, showed the highest gains. The company reached the $6bn mark last year and the CEO talked up future topline expansion.

“Out current outlook puts us on track to reach the $7bn revenues rate later this year, on the way to being the fastest to reach $10bn, which is our dream, and something we are very focused on," said Benioff.

He reckons it will soon become the fourth largest software vendor in the world.

“We are really targeting one company to surpass — SAP. Fortunately for us, its kind of lackluster growth, execution and lack of innovation [makes it] an easy target, and that's our next goal," he added.

The bottom line is an area could probably spend more time on: a spike in operating expenses of more than $100m to $1.09bn left an operating profit of $31.1m, versus an operating loss of $55.3m a year ago.

However, after income expenses and tax, the net profit was $4.1m, albeit better than the net loss of $97m in Q1 fiscal 2014.

For the next quarter, though, is predicting a small loss so sustainable profits remains something that eludes Benioff and his company, and no amount of marketing bluster can mask that fact. ®


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