Salesforce's Latest Cloud Offering - Analyst Blog

By Zacks Equity Research,

Shutterstock photo ( CRM ) recently unveiled its latest offering, leveraging Heroku's cloud-platform. The company acquired Heroku in December 2010 for a $212.0 million cash in order to enhance its cloud offerings.

Given the significant traction in cloud computing, is expected to transform customer support service for social and mobile world. This will also facilitate companies to answer field questions, complaints and compliments via Facebook, Twitter and e-mail. This offering comes for $49 a month and is aimed toward companies with fewer than 200 employees.

Through the Heroku acquisition Salesforce has gained one of the four clouds that it currently offers. Through a combined technological collaboration, has developed and just released some impressive overall numbers for 2011 which reveals that 3,000 apps were built or installed every 24 hour. This apart, the platform executes more than 650 million transactions per day, which translate to 7,500 transactions per second.

We believe that this is an important addition to the company's cloud computing portfolio, which is attracting new customers and has the potential to support the company's revenue stream going forward. The solution could attract many takers from the small business groups. The company's strategy to attract new small businesses through the solution is similar to Intuit Inc.'s ( INTU ) QuickBooks for ledgers and Google Inc.'s ( GOOG ) Adwords for online advertising.

It seems that things are going well for the company, however, Salesforce expects that higher costs may offset revenue growth to a certain extent. We are positive about the company's entire product line, but are concerned about continuous R&D investments that would somewhat rationalize the margins.

Moreover, we caution investors about strong competition in CRM application and cloud-computing areas. Google and Microsoft ( MSFT ) are worthy of special mention, since they have been fighting to win government clients at local, state and federal levels to use their online e-mail and other applications that fit into the cloud-computing space. Moreover, the company does not expect much business from Europe.

Currently, has a Zacks #5 Rank, implying a short-term Strong Sell rating.

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: CRM , GOOG , INTU , MSFT

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