Wednesday, February 21, 2007

Load Up the Truck: announced earnings today, coming pretty much in-line with a slight disappointment on the net income side. No worries, though, this is a buying opportunity. The solid subscriber growth is a validation of the power of the on-demand model, their careful attention to customer needs, and the momentum that the AppExchange will bring. Sure the stock is expensive, but that’s because they have made the competition irrelevant. Look at Oracle and SAP. The difference between them and is the power of the on-demand model. But what makes them a better company than RightNow (RNOW) or even NetSuite? Great companies offer consistent attention to their customers, enabling them with customization, great functionality, and reliable tech support. Sure, with a lot of hard work, these are easy to come by. What gives its awesome potential is the budding ecosystem of complimentary applications to enhance the core product’s functionality. Individual incentives are at the core of the AppExchange, and sure, will transfer some revenues to third-party developers by allowing them to sell their products, but in the long run, it will build durable monopoly power. As the ecosystem grows, can offer that much more to its customers.

Here’s an update of today’s numbers and my comments:
- Net Paying Subscribers Rise a Record 90,000 to 646,000 --Looking good
- Record Revenue of $144M, up 58% year-over-year --nice, but not quite as strong as it will be
- Net Customers Rise a Record 2,700 to 29,800
- Largest customer grows to 25,000 subscribers
- Operating Cash Flow of $38M --bulding a monopoly takes time, the cash will come later
- Total Cash and Marketable Securities increase $41M to $413M, up $116M year over year
- Break-even GAAP EPS, at the high end of company guidance

Pictured above: Marc Benioff, CEO and Founder