crm force.com was designed to be open and to have proper interfaces. Microsoft and Oracle products? It is to laugh, they always were intended to be closed and non-standard
Salesforce.com: Signs Of A Breaking Business
Model [View article]
Busy hardware is even better
than virtual hardware. SFDC multi-tenant architecture keeps the servers nice and
busy, resulting in lower cost than if they used virtual servers.
Nothing
amazing has come along since 1999 that SFDC cannot upgrade into. If
virtualization would help, there is nothing stopping them.
One advantage
is an open modular architecture that makes upgrades easier. It also makes it
possible to integrate other systems - see "REST API", "Streaming API", "Heroku
integration", "Java integration", etc etc.
Salesforce.com: Signs Of A Breaking Business
Model [View article]
Good points and very clear
explanations. Of course, the stock expense numbers change with the stock price,
which dropped in FY11 and increased in FY12. But, considering the rate of
revenue growth, there is no question that margins are falling.
I
disagree that the business model is to blame. I blame management. SGA is too
high. Benioff is focussed on growth at any cost. I fear he also is focussed on
keeping other people happy. That's great if you're a party planner, not so much
for a CEO. We owners ( I am a long) should keep him as CTO, or maybe CEO, but
get a businessman as COO or CEO. Somebody cranky and mean, a Ford or Rockefeller
type.
Wow, their customers are
complaining how bad it is! No, they are voting CRM #1 in customer satisfaction,
every year. Their offering is a hodgepodge?? ORCL is far more so. IBM managed to
destroy their unified architecture - Lotus - and acquired Tivoli and others.
Workers are burned out after working hard and making tons of money?
Sounds like Silicon valley - ever been there? I have. Success and burnout come
from hard work.
Different languages, etc? Get to the other side of the
mirror, Alice. SFDC has the ONLY unified architecture on earth. (I don't count
the MSFT mess as an architecture at all. No wonder their sales of Azure are
approx zero.) They have opened their architecture to the other languages and
other paradigms that are popular today (Java, Ruby, Heroku, REST, streaming, web
services) , but under it all is the same database and Apex language.
But
the article's biggest blunder is the idea that SFDC is losing money. What they
are losing is pieces of paper called "stock" and "options". What they get in
return are the world's leading new companies and products and people, and, lots
of cash dollars. Yes, dilution is 5% a year. I am happy with 5% dilution on a
stock that increases cash flow 30%. Take an accounting course. The professionals
who own almost all of SFDC stock understand this; the author clearly does not.
Cut the price but cut the
benefit: instead of free shipping, give Prime customers half off shipping. In a
way, it is half as good, and half as bad, as the other choices.
As requested, you are now
being corrected about "Deferred Revenues". It means that they were paid already,
in cash, but they did not yet provide the service. So, they book the income (and
pay taxes) later, as the time of the subscription passes.
The accounting
is the same as a magazine subscription.
In an indirect way, they do
indeed pull off that trick. They buy other companies with stock, and they pay
employees with stock options (like all dotcoms), and they pay loans off with
stock (via convertibles). The cash paid for the stock and the convertible is not
cashflow, it is capital. But, the employees (hopefully) cause cashflow, the
acquisitions (hopefully) cause cashflow, and the use of the loans (hopefully)
produces cashflow. So, by not paying cash for these things, they increase net
cashflow with stock.
Do not confuse this with the reconciliation of GAAP
losses with their positive cashflow. The stock and options are accounted as GAAP
expenses, even though they are just ink on paper. (Of course, the real cost is
dilution, but as long as we compare per-share numbers, that is already taken
into account.) The higher the stock price, the higher the GAAP expenses they
must book. These GAAP paper expenses are far more than the capital dollars the
stock brings in.
If you compare Salesforce with other companies, be sure
the other companies also are IT suppliers with billions of revenues/yr, growing
> 40% yr/yr. But, there are none.
Salesforce's biggest
competitive problem is that they do not offer a full suite of enterprise
software. Lazy buyers (and corrupt buyers) prefer to buy it all at one place.
There is no technical merit to it, since all the full-suite players offer a
crazy quilt of products that arrived in acquisitions. So the acquisition
strategy makes sense, if it enables them to offer a fuller line of products and
to compete better.
"Organic" growth from the sales automation product is
very strong, and it still can gain plenty of market share from dinosaur
on-premises vendors.
But the five-year picture is all about the
platform. Acquired products are integrating quickly because it is a superior
platform compared to Amazon, Oracle DBMS or Windows Server. (Yes, I know that
those two are components of the Salesforce platform.) Look at how fast Chatter
was integrated. Look at the AppExchange.
I will not dispute your earnings
projections, because they are pure speculation, and so are mine. At some point,
Salesforce will stop spending so much on commissions and acquisitions, and most
of their gross margin will become net margin. Don't forget that their
incremental cost of goods sold is mostly bandwidth, storage, and processor
cycles, which get cheaper every year.
A Look At The Net Income Trend Tells You That
Salesforce.com Is Headed Downward [View article]
Ridiculous. MB has Put Up
this: $4 Billion. That's the pipeline as of now, booked business that is not yet
in revenue, income, & etc. He will not shut up while revenues grow 30%/yr.
.
The post's points about architecture apply far more to their rivals
than to SalesForce. It is true that integration - both business and technical -
will be difficult and expensive. OTOH, it will be cheaper there than elsewhere,
because force.com was designed to be open and to have proper interfaces.
Microsoft and Oracle products? It is to laugh, they always were intended to be
closed and non-standard. Look at PL/SQL, or the way MS SQL-Server does not
implement ANSI SQL syntax. IBM products? What products - Lotus Notes, DB/2, and
WebSphere? I laugh heartily.
And guess what? Growth and integration is
where today's potential SalesForce profits are being spent.
It isn't
time to cut expenses and show bottom line profits. It is time to build a company
that will be a major provider of IT to companies, and nonprofits, and
government.
That will cost big $. When revenues hit ten billion/yr, and
the reinvestment era ends, and high commission costs end, and cost of goods
(networks and CPU cycles) keep plunging, and operating margins are 90%, today's
stock price will look cheap.
How To Profit From The Last Stage Of The Cloud
Bubble [View article]
To think that Salesforce does
not have profits is folly. You do not get huge, rapidly growing free cash flow
without real-world profits. GAAP is much less realistic.
Rising Competition Might Be Hurting Salesforce
More Than You Know [View article]
Great catch on those rising
marketing expenses. That number definitely bears watching.
Another
interpretation is, they are integrating eight or so sales organizations from
their acquisitions. If that is the problem, then the number should improve as
management levels are streamlined.
All those young products can be
expected to eat more expenses of all types compared to the revenues they bring.
But, the mature products should be improving on that score, and they are the
bulk of the revenues.
Another interpretation is that they reinvest every
dollar that they can, in an attempt to reach the size of the
competitors.
Unlike you, most analysts think that salesforce is earning
hundreds of millions. The difference is mostly semantics. Free cash flow per
share is high, and growing.
Salesforce.com And The Boom In Cloud
Applications [View article]
It is silly to say that SFDC
has a bottom-line loss. All the pros at the conference call discussed only the
non-GAAP numbers, and the free cash flow, because those are truer measures of
the business' performance. Or, if you want to look at GAAP, at least look at the
increase in total assets and capital, which rise from the acquisitions and the
exercise of the convertibles.
Also - Convert - no, SFDC's offering
remains #1 in customer satisfaction and #1 in Gartner's "Magic Quadrant". Their
"Service Cloud" also has that distinction. I would guess that IBM buys from
SugarCRM because SFDC is a competitor of IBM, and, because IBM wants to buy out
SugarCRM, so IBM is "kicking the tires".
Salesforce.com Just Gained A New Credible
Competitor [View article]
I agree this will improve
Sugar's appeal for at least some buyers.
Barriers to competing include
the $billions to build the data centers, the $billions to hire the people, and
the years to create a good platform. Of course "anybody" can try but the proof
is, nobody has succeeded. MSFT and Oracle are getting closer.
The
downside for Sugar is that everyone sees this as a way to get ready for a buyout
(IBM buys Sugar). If you want low cost, you do not want your vendor to be IBM.
The upside for all the cloud vendors is, it tends to validate the cloud
vs on-premises. But only the Safety-Kleens of the world did not reach that
conclusion already.
Cost is not a factor for CRM software compared to
improving the productivity of your sales team. If $200/month matters, your sales
people aren't paid very highly, and aren't generating much profit. The IBM model
(sell to the C-level execs) makes CRM software less vital, so they can fool
around with Sugar before buying it out.
Salesforce.com: Signs Of A Breaking Business Model [View article]
Nothing amazing has come along since 1999 that SFDC cannot upgrade into. If virtualization would help, there is nothing stopping them.
One advantage is an open modular architecture that makes upgrades easier. It also makes it possible to integrate other systems - see "REST API", "Streaming API", "Heroku integration", "Java integration", etc etc.
Salesforce.com: Signs Of A Breaking Business Model [View article]
I disagree that the business model is to blame. I blame management. SGA is too high. Benioff is focussed on growth at any cost. I fear he also is focussed on keeping other people happy. That's great if you're a party planner, not so much for a CEO. We owners ( I am a long) should keep him as CTO, or maybe CEO, but get a businessman as COO or CEO. Somebody cranky and mean, a Ford or Rockefeller type.
Benioff's Bombastic Boasting Can't Hide Salesforce's Expenses Bomb [View article]
Workers are burned out after working hard and making tons of money? Sounds like Silicon valley - ever been there? I have. Success and burnout come from hard work.
Different languages, etc? Get to the other side of the mirror, Alice. SFDC has the ONLY unified architecture on earth. (I don't count the MSFT mess as an architecture at all. No wonder their sales of Azure are approx zero.) They have opened their architecture to the other languages and other paradigms that are popular today (Java, Ruby, Heroku, REST, streaming, web services) , but under it all is the same database and Apex language.
But the article's biggest blunder is the idea that SFDC is losing money. What they are losing is pieces of paper called "stock" and "options". What they get in return are the world's leading new companies and products and people, and, lots of cash dollars. Yes, dilution is 5% a year. I am happy with 5% dilution on a stock that increases cash flow 30%. Take an accounting course. The professionals who own almost all of SFDC stock understand this; the author clearly does not.
Amazon's Prime Pickle [View article]
Salesforce.com Grossly Overvalued [View article]
Salesforce.com Grossly Overvalued [View article]
Salesforce.com Grossly Overvalued [View article]
The accounting is the same as a magazine subscription.
Salesforce.com Grossly Overvalued [View article]
Do not confuse this with the reconciliation of GAAP losses with their positive cashflow. The stock and options are accounted as GAAP expenses, even though they are just ink on paper. (Of course, the real cost is dilution, but as long as we compare per-share numbers, that is already taken into account.) The higher the stock price, the higher the GAAP expenses they must book. These GAAP paper expenses are far more than the capital dollars the stock brings in.
If you compare Salesforce with other companies, be sure the other companies also are IT suppliers with billions of revenues/yr, growing > 40% yr/yr. But, there are none.
Salesforce.com Grossly Overvalued [View article]
"Organic" growth from the sales automation product is very strong, and it still can gain plenty of market share from dinosaur on-premises vendors.
But the five-year picture is all about the platform. Acquired products are integrating quickly because it is a superior platform compared to Amazon, Oracle DBMS or Windows Server. (Yes, I know that those two are components of the Salesforce platform.) Look at how fast Chatter was integrated. Look at the AppExchange.
I will not dispute your earnings projections, because they are pure speculation, and so are mine. At some point, Salesforce will stop spending so much on commissions and acquisitions, and most of their gross margin will become net margin. Don't forget that their incremental cost of goods sold is mostly bandwidth, storage, and processor cycles, which get cheaper every year.
A Look At The Net Income Trend Tells You That Salesforce.com Is Headed Downward [View article]
The post's points about architecture apply far more to their rivals than to SalesForce. It is true that integration - both business and technical - will be difficult and expensive. OTOH, it will be cheaper there than elsewhere, because force.com was designed to be open and to have proper interfaces. Microsoft and Oracle products? It is to laugh, they always were intended to be closed and non-standard. Look at PL/SQL, or the way MS SQL-Server does not implement ANSI SQL syntax. IBM products? What products - Lotus Notes, DB/2, and WebSphere? I laugh heartily.
And guess what? Growth and integration is where today's potential SalesForce profits are being spent.
It isn't time to cut expenses and show bottom line profits. It is time to build a company that will be a major provider of IT to companies, and nonprofits, and government.
That will cost big $. When revenues hit ten billion/yr, and the reinvestment era ends, and high commission costs end, and cost of goods (networks and CPU cycles) keep plunging, and operating margins are 90%, today's stock price will look cheap.
How To Profit From The Last Stage Of The Cloud Bubble [View article]
Rising Competition Might Be Hurting Salesforce More Than You Know [View article]
Rising Competition Might Be Hurting Salesforce More Than You Know [View article]
Another interpretation is, they are integrating eight or so sales organizations from their acquisitions. If that is the problem, then the number should improve as management levels are streamlined.
All those young products can be expected to eat more expenses of all types compared to the revenues they bring. But, the mature products should be improving on that score, and they are the bulk of the revenues.
Another interpretation is that they reinvest every dollar that they can, in an attempt to reach the size of the competitors.
Unlike you, most analysts think that salesforce is earning hundreds of millions. The difference is mostly semantics. Free cash flow per share is high, and growing.
Salesforce.com And The Boom In Cloud Applications [View article]
Also - Convert - no, SFDC's offering remains #1 in customer satisfaction and #1 in Gartner's "Magic Quadrant". Their "Service Cloud" also has that distinction. I would guess that IBM buys from SugarCRM because SFDC is a competitor of IBM, and, because IBM wants to buy out SugarCRM, so IBM is "kicking the tires".
Salesforce.com Just Gained A New Credible Competitor [View article]
Barriers to competing include the $billions to build the data centers, the $billions to hire the people, and the years to create a good platform. Of course "anybody" can try but the proof is, nobody has succeeded. MSFT and Oracle are getting closer.
The downside for Sugar is that everyone sees this as a way to get ready for a buyout (IBM buys Sugar). If you want low cost, you do not want your vendor to be IBM.
The upside for all the cloud vendors is, it tends to validate the cloud vs on-premises. But only the Safety-Kleens of the world did not reach that conclusion already.
Cost is not a factor for CRM software compared to improving the productivity of your sales team. If $200/month matters, your sales people aren't paid very highly, and aren't generating much profit. The IBM model (sell to the C-level execs) makes CRM software less vital, so they can fool around with Sugar before buying it out.