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Salesforce.com profits plunge, commits to investment splurge

Builds own sales army

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Marc Benioff delivered a spirited defense of Salesforce.com's growth and spending plans today, after announcing income plunged on surging sales.

The Salesforce.com chief executive told Wall Street he is investing in R&D and building an international sales army to winkle Oracle and SAP out of major corporate accounts like Dell and Cisco, and to position his company for growth in online CRM.

Benioff delivered the basic "speculate to accumulate" sermon after his company announced a 91 per cent drop in fourth-quarter net income to $516,000 and break-even earnings per diluted share of $0.00, down from $0.05, despite a 58 per cent increase in revenue to $144m. Annual income slumped 98 per cent to $481,000 with EPS hitting break even, from $0.24, on a 60 per cent increase in revenue to $497m.

Salesforce.com anticipates either a possible loss of one penny per share or a potential gain of a penny per share during the first quarter.

The strain was starting to show on Wall Street, which has pushed up Salesforce.com' stock in the wake of previous quarterly declines. Not this time, though, and Salesforce.com was down almost five per cent in after-hours trading to $45.84.

The results and future outlook prompted analysts' questions over scale of investment, potential payback, and size of discounts being awarded to enterprise customers - questions Benioff declined to answer for competitive reasons.

"We are focused on growth and revenue and market share in a new company. We are organized and architected around those principles. If at sometime we decide to maximize our efficiencies like you see these large players do, then that will be a sign the market is maturing or shrinking. Au contraire. We have found this is the time for on demand computing, but to do that we have to have growth in sales, service, support and development to take advantage of the opportunity. That's the company we have created and we will continue to create," he said.

Announcing Salesforce.com's largest single enterprise deployment of 25,000 subscribers, Benioff asked rhetorically the last time analysts had heard of an Oracle, SAP or even a Microsoft 25,000 customer CRM win. "To compete against them [Oracle and SAP] you need similar armies of sales people," he said.

For the full quarter, Salesforce.com signed 90,000 subscribers at 2,700 customers, taking total subscriber numbers to 646,000. ®

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