Salesforce Revenue Rises but Outlook Disappoints -- 2nd Update
August 31 2016 - 6:59PM
Dow Jones News
By Rachael King
Salesforce.com Inc. is preparing for growth through
acquisitions, as it branches into new areas such as e-commerce and
artificial intelligence. But first it must digest some recent
deals.
Wednesday, the business-software maker posted a 25% increase in
second-quarter revenue and swung to a profit, boosted by a gain
related to income taxes.
But Salesforce offered a disappointing forecast for the current
quarter, sending its shares down 6.5% after hours.
"We did see some softness at the end of the quarter, primarily
in the U.S.," said Keith Block, the company's chief operating
officer, in an interview.
Still, Mr. Block said Salesforce raised its revenue forecast for
the year ending January 2017 to $8.28 billion to $8.33 billion,
from $8.16 billion to $8.20.
Mr. Block said the company's pipelines and customer win rates
are strong and the products are well positioned. "All those things
together give us optimism for the second half," he said.
Factoring into the raised guidance for the year is Salesforce's
$2.8 billion acquisition of e-commerce company Demandware Inc.,
which closed in July. The acquisition, Salesforce.com's largest to
date, adds e-commerce to the company's portfolio of online sales
and marketing services.
The company will need to broaden the range of products it sells
with Demandware and other acquisitions if it hopes to capitalize on
inroads it has made selling to large corporations. Potential
customers now see the company as a strategic partner, said John
DiFucci, managing director at Jefferies, in an interview last
week.
"All of a sudden, two quarters ago, we really started to see
some really strong enterprise momentum," he said. That momentum
seems to have slowed a bit as the annual contract value of new
subscriptions appears to have dipped, according to a Jefferies
report.
One way Salesforce hopes to propel growth over the next decade
is through the use of artificial intelligence to make its services
smarter. The company is starting an effort called Einstein to add
machine learning, deep learning and natural language processing to
its services. The company plans to reveal more about its plans at
its annual Dreamforce conference in October.
For example, with artificial intelligence, Salesforce.com hopes
to be able to help its customers understand which sales prospects
are the best opportunities. Also, the company hopes to better
attract developers who would like to build on top of a platform
that has intelligence built into it.
For the period ending July 31, Salesforce reported revenue of
$2.04 billion, compared with $1.63 billion in the same period a
year earlier.
Net income totaled $229.6 million, or 33 cents a share, compared
with a loss of $852,000, or break-even on a per-share basis. The
bottom line was boosted by a $266 million release of a
tax-valuation allowance as a result of the Demandware deal.
Excluding that gain and other expenses, Salesforce said it would
have earned 24 cents a share.
Analysts polled by Thomson Reuters had expected revenue of $2.02
billion, and earnings per share excluding the gains and expense of
24 cents a share.
Write to Rachael King at rachael.king@wsj.com
(END) Dow Jones Newswires
August 31, 2016 18:44 ET (22:44 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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