Salesforce: New Blue Chip Flashes a Green Light -- Heard on the Street
August 26 2020 - 6:29AM
Dow Jones News
By Dan Gallagher
The Curse of the Dow apparently takes some time to catch on.
Salesforce.com, named Monday as one of the blue-chip index's
latest entrants, posted surprisingly strong results for its fiscal
second quarter on Tuesday afternoon. Surprising because -- as one
of the largest sellers of software to businesses -- Salesforce was
seemingly well exposed to reports of corporate customers cutting
back their tech budgets as they cope with the coronavirus
pandemic.
But those cuts seemed to have spared the San Francisco-based
cloud pioneer. Revenue for the period ended July 31 jumped 29% year
over year to $5.15 billion. Billings, a measure of business
transacted during the quarter that serves as a leading indicator
for subscription-based cloud businesses, surged 34% to $4.75
billion -- well ahead of Wall Street's estimates. Salesforce also
projected better-than-expected revenue for the fiscal third quarter
and nudged up its forecast for the full fiscal year -- three months
after trimming it back on worries about the pandemic's impact.
Salesforce shares were up 14% in after-hours trading, having lagged
behind many of its cloud peers so far this year.
Per its name, the company has long been a sales machine. In
fact, it has only missed Wall Street's revenue targets once in the
past five years, according to FactSet. But its inclusion in the Dow
puts the company in a different light. With trailing 12-month
revenue of just under $20 billion, Salesforce is the largest
pure-play provider of cloud-based software. It will also be one of
the smallest companies on the blue-chip index by trailing revenue
-- ranking only above McDonald's. And it replaces oil titan Exxon
Mobil.
Salesforce doesn't plan to be at that sales level for long. The
company already speaks of hitting $30 billion in annual revenue,
which Wall Street expects to happen by 2024. Salesforce also spoke
Tuesday of the need to make a strategic shift to better position
the company "in this new all-digital work-from-anywhere
environment," which suggests the hyperacquisitive company may soon
be shopping again. That could prove to be controversial for those
who think Salesforce is becoming too addicted to big deals. But for
now, the company's strong performance in a crippling pandemic will
quiet a lot of critics.
Write to Dan Gallagher at dan.gallagher@wsj.com
(END) Dow Jones Newswires
August 26, 2020 06:14 ET (10:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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