Last evening, Jim Cramer had a brief conversation with Marc Benioff, the Chairman and CEO of Salesforce.com (NASDAQ: CRM). Cramer has been a skeptic of Salesforce.com's success and sustainability in the marketplace. He's dead wrong.
Cramer doesn't get the company's business model or understand its success.
Benioff was with Oracle Corp. (NASDAQ: ORCL) early in his career and learned the ropes there. He found that customers were frustrated because it took millions of dollars and 12 to 18 months to install new software and to train employees how to use it. Organizations were impatient with huge purchases taking too long to yield returns and improved functionality.
Salesforce.com is different. Its lead product is a CRM program, which stands for customer relationship manager. CRM, also Salesforce.com's ticker, allows for companies to track customer progress, customer happiness and customer status. The Salesforce.com programs are sold on a user-by-user basis, install very easily and are hosted at Salesforce.com's data center. There is no tying up of customers' databases. All is secured and backed up.
Benioff, in other words, understood the customer's needs and wishes. There are now several other business applications that Salesforce.com sells to its customers.
Salesforce.com customers are not tying up huge amounts of capital. They buy the modules or "seats" on an as-need basis. No wasted software sits around collecting dust.
The most important item working in Salesforce.com's favor is that its customer satisfaction rate runs over 90%--a stunning satisfaction rating for any software company. Industry norms dictate success when satisfaction rates are north of 55-60%. At 90% plus rate guarantees add on business and orders.
Salesforce.com has "reference" customers including Merrill Lynch & Co. (NYSE:MER), Cisco Systems Inc. (NASDAQ: CSCO) and Dell Inc. (NASDAQ:DELL). Technology and financial services companies "get it" quicker than many other industries when it comes to leading-edge technology.
CRM finished its fiscal year ending Jan. 31 with revenue of $497 million and earnings per share of $.22. Revenue is expected to jump this year to $722.4 million and $988.2 million the following year, according to Thomson Financial.. That's explosive revenue growth and the earnings leverage is following suit.
Salesforce.com is a big idea. It has the big boys looking over their respective shoulders, because Salesforce.com is re-defining the software model. Cramer has missed this one all along.
For more of Georges' stock ideas please visit Yared Investment Research
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Reader Comments (Page 1 of 1)
4-13-2007 @ 5:31AM
Tom Miller said...
How much further has CSX to go and what kind of upside do you see in the next 2 to 4 years..