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Bonds Are a 'Safe' Investment: A Big Lie Gets Even BiggerThis the fourth company in my on-going series of the Top 25 stocks for the NEXT 25 years. The criteria to make the list are a company's ability to address a huge market, lead the way in re-defining a paradigm shift and of course, be superbly led and managed. salesforce.com, inc. (NYSE: CRM) fits the bill. This will be the largest name on my list in term of market capitalization -- $5 billion. Why put a stock that has already achieved a $5 billion market cap on the list in the first place? Because CRM has the chance to become a mega-growth company over these next 25 years. One could argue, as I have heard before, that CRM could one day attain a $200+ billion market cap. I agree. Let's get into the reasons.
In the 1980s and 1990s, millions of businesses and government entities purchased multi-million dollar software systems to modernize their operations and be able to communicate in-house as well as through the entire supply chain. Billions upon billions of dollars were spent until the software industry almost come to a grinding halt in the early 2000s. Companies took a step back and asked the questions such as: We own it, now what? How do these systems integrate with other systems and how do we justify our huge investments on an ROI (return on investment) basis? Many found that they over-invested as they bought too much horse power and were stuck with expensive maintenance contracts. Enter salesforce.com.
CEO and Founder, Marc Benioff, came out of Oracle Corp. (NASDAQ: ORCL). He reasoned that software should be sold to customers on an as-need basis, implement easily and be hosted elsewhere as to not tie up valuable corporate database assets. He founded salesforce.com.
The first application was for customer-relationship-manager, or CRM, hence the ticker symbol. Customers could buy the "seats" as needed, pay for it monthly, thus not taking up huge capital commitments and have short training period of days as opposed to months in the older systems. Salesforce.com securely hosts the application for the customer so as to not incur more database expenses. The perfect storm brewed the beginnings of what could be the game-changer.
Salesforce.com is adding other applications to its offerings, such as human resource applications,accounting apps, etc. Salesforce.com sells its products and services based on pure customer needs and can add additional ones in five minutes. The help desk is answered by a human voice, not a plethora of recorded options. The service side of the business is as near perfect as it can be.
What will make salesforce.com a big winner is the stunning satisfaction surveys conducted by outside consulting/research firms. Satisfaction surveys are very accurate as a neutral party is conducting them choosing the right respondents who are qualified to answer the questions. Software companies live and die by these surveys. A good report is satisfaction in the 55-60% range. Salesforce.com registers consistently in the 90-95% range, which is stunning. This fosters customer loyalty and tons of repeat business. It also has the effect of moving the salesforce.com product suite from a departmental-level purchase decision to become enterprise wide.
Salesforce.com has seeded the market superbly and it has built an incredible reputation. Marc Benioff is a passionate, enthusiastic and most capable leader. Salesforce.com is the player to watch and own for the next generation of software applications.
Georges Yared is the CIO of Yared Investment Research where he explores more growth stock ideas.
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Reader Comments (Page 1 of 1)
5-13-2007 @ 4:55PM
GUMBO said...
I am a bit skeptical of CRM as it is .. I will analysze it more since you are keen on it. My first thought is about the relatively slow transmission between CRM servers and the users everywhere through pokey cable, dsl, fixed wireless, or dial up... just kidding.. As you should know that the closer the server to your PC the better. We have ethernet which is the fastest transmission at 100 mps or even gigabits . The best is to have your own harddrive and RAM all to yourselves. I dont think I can rely on the satisfaction polls from the users of CRM service. Many people dont have the concept of cyberspace. Some people are still sticking in floppies without complaing at all. Those pathetic cyberillerates are praising CRM service as they sit and waiting patiently for the data to go forth and back through the lines at the mercy of routers and all that... I am skittish about CRM. The only thing that will get me going for CRM is when fiber optics is becoming so widespread that we will detect no difference between being direct to my own lightening harddrive spinning at 7200 rpm or even 10,000 rpm with ever faster RAM at 566mhz or even 667 and up. I have no patience for the puking hourglass on the screen or the waiting hand wagging fingers!! I think very limited variety of apps would do fine with CRM but not most apps or huge files you may have...I will go checking CRM out.. Thanks dude
5-16-2007 @ 6:03PM
Gabe Mathews said...
CRM salesforce.com was suppose to earn 8 cents per share according to Analysts for Q1 today, 5-16-07. They only made 1 cent. Now nobody says anything about the 8 cents! There PE ratio is over 12,000. Ridiculous!!