Big numbers for Salesforce reported

The Salesforce numbers are out for quarter three and, as always, viewpoints have emerged. Everyone is, of course, generally pleased with the numbers. Records and/or new highs reported by the company include:

• Salesforce’s status as the first SaaS company to exceed a $500 million annual revenue run-rate;

• revenue of $130 million, a new company high and up 57 percent from 2005;

• net-paying subscribers increased a record 61,000 to a new high of 556,000;

• net rise in customers of a record 2,300 to a new high of 27,100; and

• a new high in operating cash flow of $30.6 million.

Salesforce forecasts fiscal fourth quarter revenue to be $140 million to $142 million with pro forma profits of $.20 to $.23 per share. For fiscal 2008, the company brain trust sees revenue of $700 million to $710 million.

In general, such successful numbers were expected. Salesforce stock rose all week on the exchange in anticipation of the release. Eric Savitz of Barron’s opined that the results may have been “apparently slightly disappointing to some,” because “the stock … sold off after hours, backing off 91 cents to $41.48, after losing $1.11 in the regular session. Nonetheless, the shares have roughly doubled in price since mid-July.”

The earnings conference call for Salesforce.com was hosted by David Havlek, vice president of investor relations; chairman/CEO Marc Benioff; and CFO Steve Cakebread. Naturally, the ever-quotable Benioff was effusive about the numbers, stating immediately after wishing all a good afternoon, “Our third quarter was our most spectacular quarter ever.”

Benioff, who has long stated his/the company’s overriding goal, proudly said that “As we predicted, we became the first on-demand company to exceed the $0.5 billion annual revenue run-rate. At this new level, salesforce.com has become one of the 40 largest software companies in the world today. This accomplishment … sets up our next dream, to become the first billion dollar on-demand company.”

As tangible deals marking Salesforce’s success, Benioff cited the firm “marquee deal” in the quarter, the doubling of Cisco systems (“one of our great customer success stories”) subscribers to 15,000. Also important, he stated, were the expansion transactions with Dun & Bradstreet, TD Ameritrade, and Cone Elevators. Significant new transactions for the quarter included Toyota, Siemens, Prudential, Sharp, Standard & Poor’s, Hartford Life, Borland, Servers Anamex, Astra Tech, Rentokil, Verixel, Aveta Health, Azura Bank, Mizuho, Choice Point, Thompson Financial, Symantec, and reportedly the largest Salesforce.com transaction ever in their Asia-Pacific region with an unnamed telecommunications provider in New Zealand of 1,000 users.

Benioff stated that his firm now provides 1.6 million transactions per hour, or almost 500 transactions per second.

“The future of our industry,” he said, “will be delivered on demand. Gartner now estimates that 25 percent of enterprise applications will be delivered on demand by 2011. That is just within five years. Gartner predicts that more than 50 percent of all sales force automation will be delivered on demand by 2009, just three years from now.”

And, with continued growth like they’ve experienced, Salesforce will clearly be at the forefront.

The complete transcript of the Salesforce.com fiscal third-quarter 2006 earnings call can be read at the Seeking Alpha website.

To hear the earnings call via telephone through November, call 800-642-1687 or at 706-645-9291 from outside the U.S. The pass code is 1115764.