On Jul 15, 2014, we issued an updated research report on
Salesforce is among the top three Customer Relationship Management
(CRM) vendors in the SaaS enterprise application market. Given
increasing customer adoption and satisfactory performances, market
research firm Gartner acknowledged that Salesforce is the leading
CRM solutions provider, with a market share of 16.1% in 2013, ahead
) with 13.0% market share and
) with 10.0% share.
Furthermore, Salesforce is focusing on strategic acquisitions to
expand its market share. In fiscal 2014, Salesforce acquired three
companies and in fiscal 2013 it acquired five other companies of
which the most prominent was ExactTarget. The company acquired
ExactTarget for approximately $2.5 billion in Jul 2013 to expand
its cloud-based platform. We believe that these acquisitions will
add value to Salesforce's existing portfolio and the resultant
synergies will benefit the company in the long run.
Most recently, Salesforce also entered into a strategic alliance
with the world's largest software maker,
) to offer Salesforce's CRM services on Microsoft Azure. The
partnership is expected to ensure tighter integration between
Microsoft and Salesforce clouds, which will help customers to
easily move their data between the two platforms.
The company has also been expanding its presence in Europe and
plans to open data centers in the UK (probably by Aug 2014), France
and Germany (by 2015), which will cater to international customers.
Salesforce also intends to open two data centers in Canada, thereby
strengthening its presence in the country. The opening of data
centers in these countries will help Salesforce to reach local
small and medium businesses as well as government agencies.
Moreover, we believe that the company's entry into new markets like
Canada would provide it a significant growth opportunity beyond
U.K., France and Germany.
It is worth noting that Salesforce's free add-on offerings like
Chatter will enable the company to differentiate its core
offerings, making them more attractive for customers. Moreover, the
rapid adoption of Salesforce platforms, (salesforce 2 and
salesforce 1), demonstrate its growing opportunities in the
ever-growing cloud computing segment.
On the flip side, Salesforce reported an operating loss of $55.3
million in the last quarter, which widened from the year-ago loss
of $44.5 million.The company's significantly high customer
acquisition costs and increased investments resulted in losses.
Moreover, higher costs related to the Oracle agreement, the
ExactTarget acquisition and the Dreamforce event in Nov 2013
impacted operating results. While we believe that these investments
are necessary to achieve long-term growth, we believe that margins
will remain under pressure over the next few quarters.
Moreover, competition from its peers, continued weakness in Europe,
currency headwinds and an increase in investments could pose
challenges, going forward.
Salesforce has a Zacks Rank #3 (Hold).
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