salesforce.com, inc. (CRM)

CRM does a reenactment from the movie Deliverance on the shareholders everyday.

http://www.secform4.com/insider-trading/1294693.htm

CRM: I'm gonna make you squeal like a pig. Weeeeeeee!
Shareholder: Weee!
CRM: Weeeeeeee!
Shareholder: Weee!

Since March 2005, Marc Benioff, founder and CEO of Salesforce.com, has been selling stock at a blistering pace. 10000 shares a day!!! These transactions have netted him 455 MILLION dollars!! http://www.secform4.com/insider-trading/1294693.htm

Also his second in command, Steve Cakebreak has netted ~18 million. The basis for his option exercises was $1.1.

http://www.secform4.com/insider-trading/1254015.htm

With such huge payoffs you would think Benioff & co. have delivered ginormous profits....Unfortunately this is not the case:

Net Income (since going public)

2004 - 4 million

2005 - 7 million

2006 - 28 million

2007 - NOTHING

2008 - 18 million

TOTAL: 57 MILLION

So Salesforce.com has only generated 57 million in actual income in the past four years, yet surprisingly Benioff's made out with 455 million, and is making 600K each day by selling 10000 shares at the current stock price of ~$60!! Something's rotten in Denmark I tell ya....

Looking at it another way, for every $1 in Salesforce.com income, Benioff has pocketed $8 in inflated stock sales!! Sweet deal! Don't you wish you could give people dollar bills and get eight back in return??

At the end of the day, if Benioff has cashed out a substantial portion of his stock, and the company--because of competition, a slowing economy, a changing marketplace, or some other unknown--fails to meet the expectations of future profitability that's baked into the stock, then we the investing public will have been duped yet again....

When you ask people their opinion of SalesForce.com, the responses seem to fall into two camps. The bullish camp typically hails SalesForce as the "leader in" (or even "inventor of") something called "cloud computing," cites historically consistent revenue growth, and points to a "potential market" (however it is defined) of a few billion dollars. Bears counter by pointing to astronomical ratios (as of this writing: P/E = 103, FP/E = 64, P/S = 5.5, P/B = 8.25), noting that insiders are selling a lot more than they are buying, and decrying the current "over-hyped" and "ill-defined" state of the cloud computing movement.

If you ask me, both sides have legitimate points. It's hard to argue that SalesForce hasn't been a highly successful pioneer in a previously unoccupied space (namely, software-as-a-service, which isn't exactly "cloud computing"), and as a result has staked out a sizable market share and established some nice recurring revenue streams. However, I think the "over-hyped" argument also has merit, as I see a parallel between the manner and levels with which the market currently values this stock and the way it valued some of the dot-com flameouts of the late 90s. The sky-high ratios tell me that there's a lot of expectation for torrid growth already priced in, but with big-name competitors (Oracle, SAP) launching their own SaaS offerings, and smaller, more agile and specialized shops quietly taking away market share, I'm not sure how realistic these expectations are. Additionally, it seems that SalesForce.com has some issues with end-user adoption, so we may see churn increase as this dissatisfaction causes organizational decision-makers to look elsewhere.

And then there's the whole "cloud computing" element. As a software executive, let me make one thing clear: at this point in its nascent history, no one has really agreed upon what "cloud computing" is exactly. This gives software marketing departments free reign to define "cloud computing" in whatever way best suits their company's desired message and positioning. Indeed, if you read the "Cloud Platform" page on SalesForce.com's website, it would seem that they've recently unveiled a mechanism by which "anyone" can "easily" build their own "application in the cloud" from a set of available components -- in other words, an API. While this is a welcome addition to their offerings in the name of innovation (following in the footsteps of Google and Amazon), I can tell you first-hand from years of systems design and integration experience that nearly all APIs promise more than they can ultimately deliver, so whether the SalesForce "Cloud Platform" ultimately goes anywhere (or adds anything to their bottom line) remains to be seen.

Bottom line: there's no doubt that SalesForce.com has changed the way we think about software and how it is delivered, but once the dust kicked up by its torrid growth and the surrounding hype settles, the foolish fundamentals would suggest that this stock faces an increasingly higher likelihood for underperformance.

The PE is way high. around 200. The world needs this type of product, but these guys are giving it away and not making any money. I sell a competing product SAGE CRM and CRM.COM so I am familiar with the market. Feature wise it is competitive but they are not executing their sales strategy in such a way as to have sustainable profitable growth. Look for a loss next quarter. (IMHO)

Overpriced.
Insiders are selling.
Microsoft has announced they will build a competing product.

Their product is simple to use and flexible. They seem to be succeeding at selling to major corporations. Once they get a foot in the door their products tend to spread and stick around for a long time. Expenses will stabilize as the product matures and the profits will keep rolling in.

Expected to grow 40% annually which isn't enough for a company with a PE of 200+. No thanks.

It's been a long time in the making, but I think "Thin Client" software applications are finally starting to find a niche, and they all begin with Customer Relation Management. Mobile Business needs these types of services. SalesForce will be a Force in 2008.

Sooo let's see an 8.57BILLION market cap as of this writing with a 300price/earnings ratio.....

Let's look at some other random companies.Neflix 1.91 cap 28.87 p/e
Starbucks 13cap 20.85 p/e
Pepsi 107cap 19.14p/e

So although I may not be right this company which seems to share consumer info has a market cap 8times netflix and 1/2 of starbucks(with a p/e 10 times as large), but wait theres more. Assuming the company grows earnings and eventually stabilizes at around a 20ish p/e once it's reached a large portion of its audienve let's see 8.57billion*(300/20)=market cap larger then pepsi. I really, really don't this company EVER being able to justify a market cap that large with a huge p/e.

PE (TTM) of 212........hmmmmmmmm.......bah-bye

90% customer satisfaction and retention. wow.

Proposed by Good People

Grossly overvalued. An excellent $5.00 stock trading at more than $40.00.

acquisition candidate.

dot-com valuation in 2009.

goog buyout target

The market is embracing Software as a Service enthusiastically, and CRM look like leading this segment for years to come.

2/16/09 Pitch: Downthumb. Earnings 2/25/09, 11:00 AM. Just fired 2 executives and one left. Not a good sign. Channel checks indicate ok quarter. Also not a good sign for the stock. Possible pressure on future projections.
Past trades:
11/13/08 Pitch: Upthumb. Earnings 11/20/08, 5:00 PM Overly bearish sentiment and over shorted. Likely to bounce strongly. Closed 11/21/08 @ 22.99 for +6.04 points.
8/11/08 Pitch: Downthumb. Earnings 2008-08-20 5pm A stock everyone loves to hate because of its high P/E. I don't really care about the P/E. I love the company because of its tremendous record of management and execution. The one thing that worries me is that they may show the slightest stumble. So this thumbs down is based on my risk assessment. It is too likely to happen given the economic environment. I'd rather down thumb it now and wait a bit for a retraction before climbing on as a thumbs up. Cheers to all the longs who had it right up to the present. My best regards to you. Closed 8/22/08 @ $55.68 for +20.04 points.

Overpriced.