) is scheduled to announce its second quarter 2013 results on
August 23, 2012, after the closing bell. We see limited movement in
analyst estimates over the past 30 days.
First Quarter Overview
Salesforce.com reported mixed first quarter 2013 numbers, with
adjusted loss per share of 2 cents missing the Zacks Consensus
break-even estimate. Despite solid revenue growth, higher expenses
led to the miss.
Revenue grew 37.9% from the year-ago quarter to $695.0 million. The
reported revenue was above the company's guidance range of $673
million to $678 million. Currency tailwinds, solid geographical
contribution and favorable business mix aided the revenue
improvement. During the quarter, CRM delivered 54 billion
transactions, an increase of 72% from a year ago. The company also
mentioned that more than 2 million applications were built on
Force.com and Heroku platforms.
Despite a 35.5% increase in gross profit, unfavorable mix, costs
associated with recent acquisitions and some data center
investments led to a 140 basis point margin contraction. Total
operating expenses were also on the rise (40.1% year on year),
backed by higher research and development (R&D) investments and
Second Quarter & Fiscal 2013 Outlook
For the second quarter, total revenue is expected to be in the
range of $724.0 million to $728.0 million. GAAP loss per share is
expected to be between $0.10 and $0.09, while non-GAAP diluted
earnings per share (EPS) are expected to lie in the $0.38 to $0.39
For full-year 2013, Salesforce.com raised its revenue outlook to
$2.97-$3.00 billion from $2.92-$2.95 billion. Diluted GAAP loss per
share is expected to be in the range of $0.45 to $0.08 (previously
$0.55 to $0.51), while diluted non-GAAP EPS is projected to be in
the range of $1.60 to $1.63 (previously $1.58 to $1.62).
Moreover, the company expects to continue investing in new
technologies and in key international markets, and expand through
acquisitions. Salesforce continues to aggressively hire people and
intends to expand sales distribution/engineering through fiscal
2013. The company also has plans to increase headcount in the
R&D and selling and marketing (S&M) division.
Agreement of Analysts
Analysts appear divided about their expectations for the upcoming
Some are positive about the new products launched by the company,
such as Force.com, Data.com and believe that the heavy investments
in new products will convert to market share gains. Another new
offering, Social Enterprise Vision also looks promising, as it
possesses the ability to compete with offerings from major players
Other analysts expect revenue to slow down as some companies are
using their own internal systems and hence reducing their IT
spending. Salesforce.com is also facing severe competition from its
) and Microsoft.
Despite the mixed sentiment among analysts, estimate revisions were
limited. Out of the 17 estimates available for the second quarter,
only 1 was raised and no downward revisions were made in the last
30 days. But, among the 20 estimates for fiscal 2013, there were 2
upward and 3 downward revisions in the last 30 days.
Magnitude of Estimate Revisions
The magnitude of revisions has been minimal since the company
reported its first quarter results. The Zacks Consensus Estimate
for the upcoming quarter remained unchanged at 4 cents, while the
estimate for fiscal 2013 moved down 2 cents to 0 cents over the
last 30 days. However, estimates remained unchanged for the quarter
and dropped 10.3% for fiscal 2013 in the last 90 days. The estimate
revision for fiscal 2013 reflects currency headwinds and EPS
dilution from the Buddy Media acquisition.
We believe that the deal growth momentum and new product launches
are positives for the upcoming quarter. But currency headwinds,
increasing expenses and stiff competition from its peers keep us
Though we are encouraged by Salesforce's growth prospects in the
cloud, the entry of tech giants such as
) into the cloud space would further increase competition, going
Currently, Salesforce.com has a Zacks #3 Rank, implying a
short-term Hold rating.
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