Salesforce results calm cloud market fears

Written by on February 25, 2016 in News with 0 Comments

REUTERS/Robert Galbraith

(Reuters) – Inc reported higher-than-expected quarterly revenue and raised its full-year revenue forecast, saying customers were stepping up purchases of its web-based sales and marketing software despite economic uncertainty.

Shares of the world’s largest maker of online sales software rose 7.2 percent to $67 in after-hours trading.

Salesforce, seen as a barometer for the cloud-computing sector, has benefited as more businesses choose cheaper and easier cloud-software services. Salesforce’s earnings were of particular interest to investors in the technology sector because the quarter goes through January, a month when other technology companies have said they started to see signs of weakness.

Salesforce painted a brighter picture, highlighting new or expanded deals with customers such as Charles Schwab, the financial-services company, and consumer-goods maker Unilever.

“Now, we read the same newspapers as everybody else,” said Chief Financial Officer Mark Hawkins on a call with analysts. “We aren’t seeing an economic impact.”

Part of the reason, executives said on the call, was that Salesforce often skipped over the information technology department, an area where flat spending is expected this year, and sold to other departments.

Some technology companies that have flagged potential weakness this year sell infrastructure equipment or other products that typically fall under an IT budget.

In tough times, analysts said, businesses would be less inclined to cut services that provide a direct impact to revenue, something upheld by some Salesforce customers.

“We are able to dramatically see an increase in the number of prospects we can reach and the quality of those prospects,” said Justin Hart, vice president, member acquisition, at Surf Air, a California-based subscription airline service. He said Salesforce’s software has helped the company expand by a “factor of 10” compared with the spreadsheet based system it replaced.

Eric Scollard, global sales head for IT analytics company ExtraHop, made similar comments. “It helps us understand which campaigns drive more sales,” he said.

The company raised its full-year revenue forecast to $8.08 billion-$8.12 billion, from $8.0 billon-$8.1 billion, and said forecast adjusted profit of 99 cents to $1.01 per share.

Analysts on average were expecting a profit of 99 cents per share on revenue of $8.08 billion, according to Thomson Reuters I/B/E/S.

In the fourth quarter ended Jan. 31, revenue from sales cloud – a suite of software that allows companies to track leads, forecast and collaborate around sales opportunities – rose 12.3 percent to $708.9 million.

The net loss narrowed to $25.5 million, or 4 cents per share, from $65.8 million, or 10 cents per share, a year earlier.

Excluding special items, the company earned 19 cents per share, in line with the average analyst estimate.

Revenue rose 25.3 percent to $1.81 billion, above analysts’ estimate of $1.79 billion.

(Reporting by Kshitiz Goliya in Bengaluru and Sarah McBride in San Francisco; Editing by Maju Samuel, Bernard Orr and Leslie Adler)

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