The Competitive Cloud Market: Salesforce Posted Poor Third Quarter Earnings

By Ivan | December 10th, 2011 |

Cloud computing market is attractive to many investors as the impact of today’s cloud craze. More businesses are going or planning to go to the cloud as there are more evidences of cloud computing benefits.
Unfortunately, on the flip side, more cloud businesses were established, trying to grab their piece of the cloud market pie. As big businesses are trying to maintain their momentum in securing their cloud market shares – partly by acquiring promising cloud startups – the cloud market has becoming more and more competitive, even for a big cloud company, such as Salesforce.

Last month, Salesforce posted poor third quarter earnings, causing share prices to plunge. As reported by InvestorGuide.com, Salesforce – one of the leading pioneers in cloud computing – posted 34 cents per share earnings on revenue of $584 million. Earnings increased 6 percent, while revenue increased 36 percent – looks good. However, the shares dropped 7 percent immediately after posting the earnings… what gives?

Here’s the main culprit: Although Salesforce customer bookings increased 32 percent from last year’s quarter to $918 million, the customer bookings actually declined 2 percent from the second quarter of 2011. To investors, this is one of strong indicators that Salesforce were having difficulty to attract new business.
Salesforce CEO Marc Benioff tried to calm uneasy investors by explaining that the problem is due to Salesforce’s plan to do more business acquisitions. It probably appeals Salesforce’s long-term investors, but not all will be pleased of that statement.
Regardless of the worries, analysts – such as Zacks Equity Research – still favor Salesforce’s growth prospects. Investors who are interested in picking up Salesforce’s shares were suggested to have a high tolerance for market volatility due to the acquisition plans and be prepared to invest on Salesforce’s future.
Related posts:

1. 4 Reasons Salesforce.com Disappoints
2. Cloud Business News Roundup: January 03 – 09, 2011
3. Cloud Business Trends: 2011 USD1.6 Billion Cloud Market, will Continue to Boom through 2015
4. Cloud Computing Solutions Can Make Small Businesses More Competitive
5. Cloud Business News Roundup: January 17 – 23, 2011

http://www.cloudbusinessreview.com/2011/12/10/the-competitive-cloud-market-salesforce-posted-poor-third-quarter-earnings.html