Salesforce.com vs. SAP for CRM Market Share

According to Gartner’s report, in 2011, the customer relationship management (CRM) software market was dominated by SAP, which captured a 19.3% market share. Salesforce.com came in second with a 16.7% market share, followed closely by Oracle at 16%. Microsoft was a distant fourth, with 7.5% worldwide CRM market share. But Salesforce is rapidly increasing sales to narrow the gap with SAP.

Salesforce’s Financials
Salesforce.com (NYSE:CRM) saw revenues grow 38% over the year and 10% over the previous quarter to $695.5 million, ahead of the market’s projections of $678.2 million for that period. Sales were driven by growth in their core subscription revenues, which increased 38% over the year to $655 million. Professional services grew 30% over the year to bring in the remaining $40 million. This was the company’s fifth consecutive quarter of delivering year-on-year growth in excess of 30%. EPS of $0.37 was also ahead of the Street’s target of $0.34 for the quarter.

By region, revenues from the Americas grew 43.0% over the year to $485 million. European revenues reported growth of 25.3% to $118.3 million, and revenues from Asia grew 31.8% to $92.2 million.

For the current quarter, Salesforce projects revenues of $724 million-$728  million with non-GAAP EPS of $0.38-$0.39. They expect to end the year with revenues of $2.97 billion-$3 billion and earnings of $1.60-$1.63 per share. The market expects current quarter revenues of $713.7 million with EPS of $0.38 and current year revenues of $2.95 billion with EPS of $1.61.

Salesforce’s Acquisitions
Over the last few months, Saleforce’s competitors, SAP and Oracle, have made some big purchases in the SaaS space. SAP bought SuccessFactors for $3.4 billion last year, followed by Oracle’s acquisitions of RightNow and Taleo for $1.5 billion and $1.9 billion, respectively. I believe Salesforce should acquire Concur to compete more effectively with Oracle and SAP. However, instead of making the big move, Salesforce recently acquired smaller organizations to make their presence felt in the social and collaborative tool segments.

Last quarter, Salesforce acquired collaborative text editor Stypi. Stypi was a small startup receiving funding from Y Combinator. They were known for their lightweight, real-time collaborative text editor that let multiple users edit a document on Stypi. The tool comes with a review mode and other features such as syntax correction. The acquisition will help Salesforce strengthen their social and collaborative tools.

Saleforce has been building their social and collaborative tool presence, and earlier this quarter, it launched Salesforce Rypple and Salesforce Site.com. Salesforce Rypple was a result of their December 2011 acquisition of social performance management platform, Rypple. Salesforce acquired Rypple to enter the human resources software market. The tool launched using Rypple’s technology is primarily a performance review tool that comes with the social and collaborative features.

Salesforce Site.com is a content management system that lets organizations create custom websites hosted on Salesforce. Using templates available on Site.com, organizations can not only build websites for the Internet, they can also build mobile device sites and Facebook pages.

Salesforce’s stock is trading at $145.69 with a market capitalization of $20.11 billion. It touched a 52-week high of $164.75 earlier this quarter.