Is the move by Salesforce.com to report subscriber totals semi-annually a warning sign?
It's an interesting question and one that was brought up by Stanford Financial Group analyst Neil Herman in a research note Thursday following Salesforce.com's earnings. Herman wrote:
We noted in our coverage initiation that we expected for Salesforce.com at some point to stop reporting its subscriber numbers and that we would view that event as a significant warning sign. It reminds us of PeopleSoft's announcement many years ago, when it was a high multiple, loved stock that the company would stop giving out its quarterly contracting activity. Soon after, the stock began declining. Salesforce.com plans to now report it subscriber numbers on only a semi-annual basis instead of the previous quarterly basis. This change in disclosure worries us, particularly given the tremendous growth in subscribers this quarter.
Herman's theory is worth noting for the future just to see how it plays out.
Other odds and ends:
Salesforce's big 25,000 seat customer isn't going to be Cisco. Going through the SeekingAlpha transcript and my notes, it's unlikely Cisco is the big customer.
Marc Benioff said last night:
"We will announce our largest deal ever; a major customer expanding to 25,000 subscribers, 19,000 which are net new subscribers in the fourth quarter."
Since Cisco had 15,000 subscriptions it is ruled out. The starting point for that new customer is 6,000.
Costs are rising as it moves upstream. As Joshua Greenbaum notes, Salesforce is going to see increased expenses as it tries to compete with the likes of SAP and Oracle. In big corporate accounts, you need a little more face time. Salesforce has 2,070 full-time employees. That's a doubling of headcount in 18 months.
"Our channel is our direct sales force and that has worked incredibly well for us. We are competing against organizations who have large established direct sales organizations like Oracle and SAP, and to compete against them and their mainstream accounts, we have to have similar armies and soldiers. I am sure that it is clear that two of Oracle’s very largest high-tech accounts, Cisco and Dell, just decided to go with Salesforce for their large enterprise application deployment. That competition takes place in person in their offices at the highest levels of their company and we have to be able to be prepared to present and represent ourselves in a peer manner. That is our distribution model and, of course, we won those customers away from Oracle."