The end of software?
Reporters once could count Marc Benioff as a veritable rent-a-quote machine.
Over the years, the outsize CEO of Salesforce.com--Benioff stands 6 foot 5 and has an ego to match--positively delighted in veering off the corporate script, turning the verbal cannons loose on whatever target was in his gunsight.
That was before he had a publicly traded stock to worry about as CEO.
Five years after founding Salesforce.com, Benioff's company went public last month on the New York Stock Exchange. But Salesforce.com's path to Wall Street took an unexpected detour when the U.S. Securities and Exchange Commission delayed the offering because an overly chatty Benioff violated quiet-period rules by granting an on-the-record interview to The New York Times in May.
Since then, Benioff, once profiled in a magazine article as "the biggest mouth in Silicon Valley," has been doing a good impersonation of Greta Garbo.
Ducking the limelight until the conclusion of the post-IPO quiet period, he finally ended his silent treatment of the media on Wednesday to host a briefing for securities analysts in New York. While Benioff's pre-IPO trouble did nothing to dent investor enthusiasm for the company on its initial day of trading--shares climbed by 56 percent that day--Wall Street wasn't so impressed with the company's reported 2004 earnings and sales forecast, sending shares down roughly 27 percent.
Stock fluctuations notwithstanding, Benioff remains optimistic that Salesforce's business model will prove its value. The company sells monthly subscriptions to customers who use the company's sales and customer service applications online over the Web.
An outspoken critic of the way enterprise software gets sold, Benioff--who spent years learning the ropes at Oracle under Larry Ellison's tutelage--maintains that such pay-by-the-month programs over the Internet are quicker to set up and easier to maintain than rival products offered by the likes of Siebel Systems, SAP and Oracle.
CNET News.com caught up with Benioff shortly after he wrapped up his first public presentation as a public CEO.
Looks like your first financial-analyst day didn't do much for your stock. What happened?
We made a number of exciting announcements today. We announced that as of the end of June, we had 10,700 customers and 161,000 paying subscribers. In the first 60 days of our second quarter, we've added 900 customers and 14,000 paying subscribers. We think that's very good growth. And we also announced two new large customers today. We announced Corporate Express, which has 3,000 users. And we also announced that Cisco Systems is making a worldwide deployment on Salesforce.com for the worldwide sales organization and channel partners.
That sounds like great news, but investors weren't impressed. Your stock lost more than 25 percent of its value.
For us, we can just tell you exactly how we're doing, and the market has to react to it. We're excited about our progress. We're excited about our customers, about our user growth and customer growth. We'll just have to see, over the long term, how the stock does.
A lot of enterprise software companies are missing their financial targets. What do you think is going on?
| I've said it before--I think it's the end of software. |
Are you feeling this pullback on corporate software spending as well?
We added 19,730 subscribers in all of the first quarter, right? So far, in the first two-thirds of the second quarter, we've added already 14,000 subscribers. So that should tell you that we're still seeing good, solid subscriber growth.
But isn't your model a small sliver of the overall business applications market?
I don't think so. I think that in terms of customers and market share, and strategic deals that are closing--today we had a panel with Automatic Data Processing, Corporate Express, SunGard and Innovex Pharmaceuticals. And we had the Cisco announcement. Those are all traditional prospects for large enterprise systems. Why is it that we're closing those deals, but Siebel's not? I think that's really the question at hand. Our job is to continue to deliver on that momentum.
You've been taking pains to keep yourself out of
trouble by not saying things to the media. Have
you learned lessons from the bumpy road that preceded your IPO?
Well, it's all lemons in the lemonade. We're very happy with the outcome of the IPO, and we're excited to be a public company. It's been an exciting journey, and we're happy that we made it.
After The New York Times interview that got you into trouble with the SEC, can we expect a more subdued, restrained Marc Benioff from now on?
I plan to take you out to lunch often, Alorie.
You raised $110 million from the IPO. How is Salesforce going to spend all that cash?
Well, we talked about that in the S-1 (SEC form), which is how
we're going to use the proceeds. We haven't really
changed anything since we wrote that document.
Where do you go now? Where are you taking Salesforce?
The most important thing is that we continue to deliver on our proposition of success that's democratized. That is, we have small customers like Zagat, which has 20 subscribers. We have midsize customers like Polycom, which has 250 subscribers, and we have large customers like ADP, which has 3,000 subscribers.
That's what's exciting to us--that we're able to deliver on that democracy and level of commoditization associated with our service. This is a worldwide phenomenon. It's the most successful new technology paradigm introduced in the software industry since we started the company in 1999.
Yes, but the software industry is so fickle. You're only as good as your next big idea. What's that going to be for Salesforce?
| We made Larry Ellison a lot of money on the IPO, but I haven't really got my thank-you call yet from him. |
In terms of capabilities, we're very focused on customization. We're very focused on integration. We're very focused on making the technology more global and more state-of-the-art. And with Enterprise 2.0, we're going after larger and larger enterprises.
At one point, you talked about expanding beyond the customer relationship management (CRM) arena into accounting and supply chain systems. Is that still a possibility?
We're talking to customers constantly. But when you look at customers like Cisco, they already have a general ledger, they already have payables. CRM is a green field, because more than 50 percent of all CRM implementations have failed. And this is the area we're focused in, and this is the right place. We're closing more deals, more large deals and more subscribers than perhaps all on-demand companies combined, as far as we can tell.
Do you worry that being public makes Salesforce.com a takeover target? We just heard (Oracle CEO) Larry Ellison talk about his shopping list. Those on it are San Francisco Bay Area companies led by former Oracle executives. Salesforce might fit the bill.
We made Larry Ellison a lot of money on the IPO, but I haven't really got my thank-you call yet from him.
Do you have a shopping list of your own?
We don't have any comment on acquisitions.
Do you have a five-year plan for the company?
Our five-year plan is to make as many customers successful as possible. I think this is the key, that we continue to listen to them and drive our products toward what they need.