salesforce.com, inc. (CRM)

blitzen94 (< 20) Submitted: 10/11/06 7:19 PM : Start Price: $40.12 CRM Score: -75.13

I know everyone is down on this one because of valuation but I have some reasons beyond the price tag that worry me enough to call for a short-term and long-term underperform. They're listed below but here's a bold prediction first: I think Salesforce.com will get bought out before it bottoms out. The decline won't be a total wipeout, not by a long shot, but there's reason to worry.

1. CRM (the concept, not the company) is on a decline. As time goes on we're seeing consolidation into two big players (SAP and Sieb-acle). The move to dominate the front office and back office is legit and will pay off handsomely. That's what CRM (the company) is up against and I wouldn't bet against Oracle or SAP. Customer relationship management is losing it's place as a stand-alone effort, becoming now more of an add-on to other systems much like Billing is part of an HR application. The market has been very well exploited already so true growth will be hard to come by without stealing significant market share of a pie that's shrinking anyway.

2. Saleforce was the first mover but hasn't done enough to maintain its lead. Hosted CRM was a great idea but as economies of scale are reached in hosting huge data loads over the web, other players can now do more than nibble in Salesforce's space. Many "experts" view SugarCRM, the "free" option as every bit as good as Salesforce with much less overhead and commitment. The lead that Salesforce.com has over these newer competitors is nowhere near the lead Siebel had over Salesforce.com. This will be a growth limitor. If you're not going to go with a big boy then there are options beyond Salesforce.com that now warrant consideration. This wasn't true two years ago.

3. The near-term future appears to be in business intelligence and analytics. Salesforce is good here but not great. They're a niche player and will most likely miss the next "boom" in their related industry which is taking this massive mess of customer data and turning into something predictive and actionable.

Then again, I've spent the last six years toiling away in the CRM space so I could just be jaded! :)

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