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The Salesforce 'Analysts' Call… A Circle Jerk

February 24, 2012 | About:
The Dividend Guy Blog

ToddSullivan

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A bit of a rant…

As I was driving the boys to hockey practice last night I tuned into the Salesforce (CRM) earnings. I was disgusted. I am pasting portions of the transcript from Seeking Alpha below. Do not read on a full stomach. Here is the thing. “Analyst” means you actually analyze the company. NO company is perfect and in fact CRM is seeing three years in a row now of decreasing GAAP results. Those results are not only decreasing but are doing so at an increasing rate.

Why not a single question on that? Really? Not one question of the cratering profitability of a $20 billion company… not one? Why not a question on the accounting change that led to management getting bonuses despite the GAAP results falling off a cliff? For goodness’ sakes, Apple (AAPL) gets far tougher questions on its calls and yet is one of the most profitable companies on earth. CRM LOSES MONEY!

I honestly think a Chris Mathews MSNBC interview of Obama would feature infinitely tougher questions (or a Hannity/GOP candidate to throw the other side a bone). I mean “Great quarter guys, tell me why X product is so great.” Really? Just quit, you aren’t even coming close to doing your job. This just reeks of the same crap we heard during the dot-com debacle.

Here is the list of offenders:

Brent Thill – UBS Investment Bank, Research Division

Jason Maynard – Wells Fargo Securities, LLC, Research Division

Heather Bellini – Goldman Sachs Group Inc., Research Division

Mark R. Murphy – Piper Jaffray Companies, Research Division

Adam H. Holt – Morgan Stanley, Research Division

Brad A. Zelnick – Macquarie Research

Kash G. Rangan – BofA Merrill Lynch, Research Division

Edward Maguire – Credit Agricole Securities (USA) Inc., Research Division

Thomas Ernst – Deutsche Bank AG, Research Division

Laura Lederman – William Blair & Company L.L.C., Research Division

Richard G. Sherlund – Nomura Securities Co. Ltd., Research Division

So, here it is in all in all its dismal pandering, ass-kissing, fluffing, groveling and sycophantic glory.

Brent Thill – UBS Investment Bank, Research Division

Marc, just on the large deal front, obviously, you saw an incredible pickup. Can you just help us understand now that you’re passing to the 9-figure mark, what you’re starting to see in the pipeline. I had one quick follow-up for Graham.

Jason Maynard – Wells Fargo Securities, LLC, Research Division

Marc, can you maybe talk a little bit more about social in terms of where you’re seeing the initial uptake? Is it collaboration for internal workers? Are you starting to see some traction beyond Radian6 for external customer engagement? What’s the path, if you will, that companies are taking on the social enterprise journey? And how is it driving, if you will, standardization around use [ph] the front office system of record?

Heather Bellini – Goldman Sachs Group Inc., Research Division

Marc, I was wondering if you could talk a little bit about Heroku and what’s driving the ramp in that business, kind of what are you seeing from people, given some of the growth that you talked about in your prepared remarks. And also, I just wanted to know, if you had to look out for this year or even the next 2 years, and you look at the Service Cloud business, is that kind of the next big pillar of growth that can surprise to the upside given all those old call center deployments that were out there from the last decade

Mark R. Murphy – Piper Jaffray Companies, Research Division

I wanted to ask you a question on the Radian6 social monitoring product. How is it changing the game when you can walk through the door and meet with a prospect and demonstrate that you know more about certain aspects of their business than they do? I can’t imagine there’s really any other company in the world that can do that. And if you can open a company’s eyes to what is being said about them on the social web, is that in turn accelerating adoption of all your other products so that the customer can engage and respond?

Adam H. Holt – Morgan Stanley, Research Division

My question, I guess, Marc, is to you. You’ve been pretty steadfast in your commitment to investing in the growth opportunities in front of you, and obviously, that’s bearing out with terrific numbers this quarter. You did, however, guide to margins going up next year for the first time in several years. Can you give us your latest thoughts in terms of how you’re thinking about the balance between growth and margin expansion?

Brad A. Zelnick – Macquarie Research

Marc, the large deal of your metrics are unbelievable. Obviously, a 9-figure deal doesn’t happen overnight, and it refutes all of the bearers [ph] in thinking that Salesforce is really only a midmarket company and really can’t penetrate the large enterprise. With that said, clearly, something has changed. Something’s changed in the willingness for large enterprises to make enterprise-wide, not just department-level commitments, to Salesforce as a platform. But can you maybe speak and what is the pipeline of those large deals look like? How do you think about the mix of your business looking 1, 2 years out in terms of large enterprise, midmarket and SMB?

These aren’t questions. These are “Hey Mark, tell me why X product is the greatest thing ever invented.” This is like the lady interviewing the Goji Juice guy:



The only thing these questions accomplish is to allow Beniof a platform the “pretend” to answer a question while going on an extended sales pitch for whatever product the “analysts” set him up with. It's a joke.

After telling us repeatedly last quarter that “deferred revenue,” which showed much slower growth, should essentially be ignored, the company now magically changes the way it accounts for it and SURPRISE, the growth in it rises faster and NOW we should focus on it. More on this later but this looks like another “bait and switch” in reporting metric by the company that of course the analysts (most) and MSM either completely miss or choose to ignore.

I am going to guess that this may be a result of CRM cutting access to those not “on board.” In a follow-up post you’ll see that the houses pointing out the questions billing growth are mystically not on the call. I know this critic here was not allowed on. While I will admit there is more than a good chance they have no idea who the hell I am, there is ZERO chance they do not know who some of the other doubters are.

Here is @jimcramer.. These are becoming useless, little more than a glorified PR piece for the CEO. Really, what is the point? Not a single challenging question. This isn’t an interview but another late night infomercial. I could not even finish this. Did Beniof whip out a ShamWOW at the end?


























Rating: 3.8/5 (23 votes)

Comments

SapientInvestor
SapientInvestor - 2 years ago
They also never gave a reasonable explanation why they chose to no longer report the number of individual customers.
noblepaladin
Noblepaladin - 2 years ago
I wonder what will happen when the stock stops being overvalued. They issue a lot of shares as employee compensation (which all the insiders dump immediately, I've never seen so much sells on the insider trading list). If the stock price goes down, they'll have to issue a lot more shares as compensation. But if the stock stays high, they can use shares as currency and actually buy stuff that has real value or use it to pay employees.

Salesforce is not a terrible business. If they stop expanding so aggressively, they can get positive earnings. It should be worth a few billion, not 20 billion.
extramiler
Extramiler - 2 years ago
Slightly off topic, but I am curious how you listened to the conf call while driving your kids to hockey. I need to catch up with some newer technology! Thanks.

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