Competition Continues for Solid CRM Acquisitions

Cloud computing and Software-as-a-Service (SaaS) offerings continue to remain a high-growth segment according to several research reports. Recently published Gartner’s Market Trends: Platform as a Service, Worldwide, 2012-2016 estimates that SaaS and cloud-based business application services will grow at an annual rate of 19% from 2011 through 2016. The industry will be worth $32.2 billion in 2016, compared with $13.4 billion in 2011. IDC estimates enterprise cloud application revenues to grow from $22.9 billion in 2011 to $67.3 billion by 2016, reporting an annual growth rate of 24%.

Salesforce’s Financials  
Salesforce.com’s (NYSE:CRM) Q3 revenues grew 35% to $695.5 million, ahead of the market’s projections of $788.4 million, ahead of the market’s estimates of $776.6 million. EPS of $0.33 was also ahead of the Street’s target of $0.32 for the quarter.

By segment, revenues from subscription and support services grew 35% to $740.6 million and professional services grew 36% to $47.7 million. By region, revenue in the Americas grew 38% to $547 million. On a constant currency basis, revenues from Europe grew 41% to $134 million, and revenues from Asia grew 30% to $107 million.

For the current quarter, Salesforce expects revenues to be $825 million-$830 million, compared with market estimates of $829.9 million. It projected an EPS of $0.38-$0.40 for the quarter, compared with the Street’s target of $0.40. Salesforce projected to end the next fiscal year with revenues of $3.8 billion-$3.85 billion, in line with analyst estimates of $3.83 billion.

Salesforce’s Acquisitions
Saleforce has been on an acquisition spree this year. This summer, it announced the acquisitions of BuddyMedia, Choicepass, and Thinkfuse.

Salesforce’s competitors are making major efforts to grow within the SaaS space through their own acquisitions. Earlier this year, Oracle acquired Virtue, a social media marketing platform for $300 million. Salesforce is competing with Oracle through the acquisition of BuddyMedia, another social media marketer, for $689 million. BuddyMedia’s  social media marketing offerings cater to big brands, including Ford, Hewlett Packard, L’Oreal and Mattel. Its platform enables these brands and organizations to connect with more than a billion consumers on social networks, including Facebook, Google, LinkedIn, and Twitter. Through the acquisition, Salesforce will be able to integrate BuddyMedia’s social marketing initiatives into its Marketing Cloud to deliver an enhanced choice for brands for advertising.

As part of its HR initiative, Saleforce acquired ChoicePass, a HR services startup founded a year ago. ChoicePass’s Perk product enabled employees of smaller organizations to access the benefits normally available to bigger organizations. Employees can now get discounted memberships, tickets to entertainment shows, and other discounts.

It also acquired Thinkfuse, another enterprise-focused startup. Thinkfuse helps organizations use status reports as powerful business tools. Seattle-based Thinkfuse’s services included creation of automatically-generated project reminders, progress reports, and status reports into updates from teams across an organization. Thinkfuse’s group communication tools helped make communication within an organization simpler, transparent, and more effective.

The market has reacted positively to Salesforce’s performance. The stock is trading at $158.91 with a market capitalization of $22.55 billion. It touched a 52-week high of $164.75 in April 2012. The stock has recovered significantly since the 52-week low of $94.09 it touched in December 2011.