Subba’s Serendipitous moments

May 29, 2007

Salesforce.com’s mixed results

Filed under: Business,Competition,Model — Subbaraman Iyer @ 4:27 pm

Salesforce.com which is the category leader for hosted applications or simply referred as SaaS has been breaking new ground every quarter. Every other software company from Oracle, SAP and even Microsoft now wants to offer their software on a hosted basis, after Salesforce.com proved that the model is scalable and customers like Cisco, Merrill Lynch and other Fortune 500 companies have become satisfied users.Its Apex platform has been a huge success with over 500 applications from third party developers.

Yet Salesforce.com’s results are below expectations for reasons which are difficult to understand.

The company has acquired close to 600,000 subscribers and serves more than 25,000 companies. It posted 75% revenue growth in fiscal 2006 and a higher growth in 2007. Yet, the company reported earnings of of just $0.5 million on revenues of $144 million in the March quarter.

Is the company intentionally sacrificing its bottom line for top line growth in view of the forthcoming competition?

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Does anyone have a view?

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