Salesforce Offers Upbeat Signal On Prospects for Tech Spending -- WSJ
August 23 2019 - 3:02AM
Dow Jones News
By Sarah E. Needleman
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 23, 2019).
Salesforce.com Inc. raised its full-year revenue outlook after
reporting record results in the latest quarter, a positive sign for
enterprise-technology spending as some companies in recent weeks
warned of weakening client sentiment.
The business-software provider said Thursday revenue in the July
quarter rose 22% from a year earlier to $4 billion, beating
analysts' consensus estimate of $3.96 billion and the company's
internal guidance.
Salesforce also surprised Wall Street with a second-quarter
profit, though it was off 70% to $91 million, or 11 cents a share.
The company had expected it would swing to a loss, in part, from
accounting charges related to its $300 million buy of
Salesforce.org, a public-benefit corporation that was a reseller of
Salesforce software to the nonprofit and education sectors.
Excluding stock-based compensation and other items, Salesforce
said its quarterly profit was 66 cents a share, higher than the 47
cents a share analysts polled by FactSet had forecast.
Shares increased nearly 7% in after-hours trading.
Salesforce's revenue and stock price have risen in recent years
as companies accelerate spending on digital transformations. The
20-year-old company, whose reputation grew from providing
customer-relationship management tools, has also been positioning
itself, similar to German rival SAP SE, to be a dominant provider
of cloud-computing applications.
"Whatever is going on around the world, we see a buying
environment where we see CEOs investing -- and top of mind for them
is digital transformation," Salesforce Co-Chief Executive Keith
Block said on a conference call with analysts. "That's why they're
turning to us and that's why you're seeing these results."
For the current year, the San Francisco company raised its
forecast for revenue to be between $16.75 billion and $16.9
billion, up from between $16.1 billion and $16.25 billion. However,
the company also cut its earnings outlook as it works to digest a
series of acquisitions.
Salesforce closed its largest purchase to date earlier this
month, buying data-analytics platform Tableau Software Inc. for
more than $15 billion in stock. Less than a week later, it struck a
$1.35 billion cash-and-stock deal to buy ClickSoftware Technologies
Ltd.
Salesforce said Thursday it expects full-year earnings of 28
cents to 30 cents a share, off from its prior guidance of 78 cents
to 80 cents a share.
The quarterly results are also a sign of relief for investors
because Salesforce beat expectations despite concerns around
potential softness in international markets and headwinds related
to currency exchange rates, Stephens analyst James Rutherford
said.
The report comes after firms including networking-gear maker
Cisco Systems Inc. and data-storage company NetApp Inc. raised
concerns earlier this month about potentially tepid growth in
information-technology spending.
World-wide spending on enterprise-application software is
expected to rise 8.8% this year to $210.69 billion, according to
Gartner Inc., but that pace is slower than the nearly 13% growth a
year earlier. Salesforce is the fifth-largest
enterprise-application-software company in the world by revenue,
with 5% of the market, the research firm said.
One area where Salesforce still has room for growth is overseas,
according to Wedbush Securities analyst Steve Koenig. "Their
exposure internationally is still relatively limited to what it can
be longer term," he said. "These guys have a lot of legs."
Earlier this month, Salesforce hired an executive to lead its
unit covering the U.K. and Ireland, where it last year announced
plans to invest $2.5 billion to increase hiring, data-center
capacity and office space to support a growing customer base.
Salesforce also this month hired an executive to run a unit
covering Australia and New Zealand to drive growth.
In addition to Tableau and ClickSoftware, Salesforce has made
several other acquisitions in recent years to provide its customers
with more tools and services. It bought cloud-application builder
MuleSoft Inc. in a $6.5 billion deal last year, and acquired
e-commerce platform Demandware Inc. for $2.8 billion in 2016.
Write to Sarah E. Needleman at sarah.needleman@wsj.com
(END) Dow Jones Newswires
August 23, 2019 02:47 ET (06:47 GMT)
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