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$67.53 -2.37 (-3.39%)
7/3/2008 1:04 PM

salesforce.com, inc. (CRM)

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The Company is a provider of application services that allow organizations to easily share customer information on demand. It also provides CRM service to businesses of all sizes and industries worldwide.

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Avatar uncch08 (< 20) Submitted: 3/14/08 4:57 PM : Underperform Start Price: $59.63 CRM Score: -18.91

There are two key components of Salesforce's business that aren't factored in to present valuation.

1) Increased Competition - Microsoft and Oracle will be fighting hard to take market share away from CRM and that will put a damper on margins despite growth.

2) Margin Disparity - Due to the resources required to provide SaaS, traditional software margins will NEVER be realized for Salesforce. There will always be a large variable cost associated with providing the service and CRM has not been able to scale their operations the way Microsoft and Google have.

Additionally, overhyped acquisition speculation is keeping the stock at unsustainable levels while insiders continue to sell into the rise. CEO Marc Benioff has slowed his selling amidst criticism from the investing community. Also, GAAP profits have been significantly eroded by excessive stock options grants - taking this into consideration, the company has yet to make any real profits.

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Avatar Richthofen80 (74.53) Submitted: 6/03/08 11:56 AM

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your margin disparity fails to take into account that SaaS may require capital expenditure but it also does not require warehousing or any other supply chain infrastructure to bring the product to consumers.

However, I agree that this stock is a short based on its P/E of 300. Nosebleed territory

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