) recently acquired DimDim for $31 million to bolster its
Chatter application business. Chatter is an application that
provides social networking and real-time connection features for
enterprises. While the Chatter collaboration network constitutes
less than 4% of our estimate for Salesforce.com stock, the impact
this product could have on other aspects of the business does
provide real upside for the company. Salesforce.com could use
Chatter to expand its enterprise customer base and up-sell its more
valuable cloud-based products like its customer relationship
) or computing software. Salesforce.com competes with SAP (
), Oracle (
), Microsoft (
) and IBM (
) in the CRM software market.
Our price estimate for Salesforce.com stock stands
, which is about 10% below market price. As Chatter individually
generates less than 4% of our price estimate for the company,
cloud-based customer software (63%) and cloud computing (26%)
remain the largest value contributors for Salesforce.com.
Chatter Should Help Salesforce.com Expand its Customer
Chatter is a cloud-based social collaboration application
through which enterprise users can create profiles with
professional information like personal contact data, area of
expertise, and work history. Users can also share business
documents and post status updates on individual documents and
applications, as well as form discussion groups.
The advantage that Chatter has over other social networking
sites like Facebook and Google (GOOG) Buzz is that it provides
additional security and privacy features. With the acquisition
of DimDim, the company will likely add
web-conferencing capabilities to the Chatter application. This
would presumably be in the form of a browser-based web conferencing
platform based on an open-source platform (and would not require
the installation of any software).
This feature will enhance the draw of the Chatter application
for enterprise users. Chatter has witnessed a rapid pace of
adoption, with more than 10,000 customers signing up within a week
of its June 2010 release. This total spiked to 20,000 users within
two months of the product's launch. We estimate that the number of
paying Chatter subscribers could increase from around 100,000 in
2010 to 2.5 million by the end of our forecast period.
However, as Chatter contributes less than 4% to our value
estimate for Salesforce.com stock, the direct upside from
additional Chatter subscribers is limited.
Upside Opportunity for Salesforce.com Stock
Chatter facilitates the expansion of Salesforce.com's customer
base, through which it can then up-sell its more valuable
cloud-based products to enterprises. CRM software helps companies
better manage customer data and information, enhancing service and
increasing sales. Salesforce.com's market share in the CRM market
increased from an estimated 7% in 2006 to around 14% in 2010, and
we anticipate a further increase towards 25% by the end of our
There could be an upside of more than 12% to our estimate for
Salesforce.com stock if its market share accelerates towards 30% by
2017 (vs. our 25% estimate), putting our number just ahead of
The growth opportunity could be even greater if the company
manages to up-sell its other cloud-based products like Force.com, a
development platform for corporate IT departments and independent
developers to build business applications.
Drag the trend lines in the charts above to see how various
trends in Chatter subscribers and CRM market share could affect
Salesforce.com's stock value.
Register to win a free iPad. Visit our home page
You can see the complete $128 Trefis Price
estimate for Salesforce.com stock here