Salesforce Lifts Its Outlook -- 2nd update

By Jay Greene Features Dow Jones Newswires

Salesforce.com Inc. posted a 26% jump in deferred revenue for its fiscal first quarter, easing concerns after the company provided a lukewarm forecast for billings three months ago.

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Results were so much better than it had expected, Salesforce lifted its outlook for revenue for the year by $100 million from what it had anticipated just three months ago.

The San Francisco-based business-software company now expects annual revenue of $10.25 billion to $10.30 billion, up 22% to 23% from the prior year. Salesforce also bumped up its expectation for per-share profit for the year by a penny to between 6 cents and 8 cents.

Salesforce attributed the higher forecast to its ability to grow more quickly than it expected three months ago. It is doing so even in the face of competition from Microsoft Corp., Oracle Corp. and ServiceNow Inc.

Even though rivals are targeting Salesforce's stronghold in customer-relationship management, the company said it is able to grab significant pieces of new business in the growing field. "We're absolutely taking share," Salesforce president and operating chief Keith Block said in an interview.

Since Salesforce relies on subscriptions of its web-based, on-demand software used by business customers, deferred revenue is a strong indicator of the company's prospects. Deferred revenue, which consists primarily of billings received in advance for subscription services, totaled $5.04 billion in the quarter.

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The company surprised Wall Street three months ago, forecasting first-quarter deferred-revenue growth of 22% to 23%, a sign that billings growth wouldn't be as robust as some analysts expected. In the year-earlier quarter, deferred revenue grew 31%.

"It was a somewhat low hurdle," Stifel, Nicolaus & Co. analyst Tom Roderick said of the earlier guidance. "They blew past it."

After Salesforce reported its quarterly results Thursday, its shares climbed 1.8% to $89.40 in recent after-hours trading.

Revenue from Sales Cloud, the company's sales-force automation business, rose 15% to $829.6 million. Salesforce is facing increased competition in the business from Microsoft's Dynamics applications, which some analysts believe is luring small and midsize customers with aggressive pricing.

"The worries about Microsoft Dynamics pressuring them isn't showing up in the numbers yet," Mr. Roderick said.

Salesforce's Service Cloud business, which provides technology to help businesses run customer-service operations, generated $651.2 million in revenue, a 21% gain. That business is facing increasing competition from ServiceNow Inc.

And revenue from Marketing Cloud, the company's offering to manage customers' email and advertising campaigns, which was bolstered by the July acquisition of Demandware Inc., grew 56% to $289 million.

Salesforce posted a loss of $9.2 million, or a penny a share, for the quarter ended April 30, compared with a profit of $38.8 million, or 6 cents a share, a year earlier.

Excluding the impact of items such as amortization and stock-based compensation, adjusted earnings rose to 28 cents a share from 24 cents a year earlier. Revenue gained 25% to $2.39 billion.

Analysts surveyed by S&P Global Market Intelligence expected Salesforce to report adjusted earnings of 26 cents a share on revenue of $2.35 billion.

Write to Jay Greene at Jay.Greene@wsj.com

(END) Dow Jones Newswires

May 18, 2017 21:38 ET (01:38 GMT)