Despite a rock-solid performance in the fourth-quarter, Salesforce.com‘s (CRM) shares have lost 5% this year. In fact, its revenue and earnings growth have been quite impressive in the recent quarters in spite of tough competition from industry leaders such as Oracle (ORCL) and SAP (SAP). Besides, Salesforce.com offered a healthy outlook and investors should utilize this opportunity to buy more shares.
Salesforce reported a hike of 33% in revenue to $4.07 billion, year-on-year, and its non-GAAP earnings came in at $0.35 per share. Besides, its results were positively affected by its $2.6 billion acquisition of ExactTarget. Also, this acquisition has helped Salesforce to reinforce its cloud business.
In addition, its growth should remain intact going forward as it has signed numerous deals and it focused on innovation. Salesforce is concentrating on various aspects of its business that should help it build a competitive edge over its peers.
This lucrative deal, along with some good numbers, helped Salesforce increase its revenue forecast. Apart from this, Salesforce also expects its non-GAAP net profit to increase by 125 basis points to 150 basis points.
Salesforce's ability to meet customer demand makes it the number one choice in the market. Besides, its recently launched Salesforce1 solution is gaining traction in the market and driving long-term growth. This solution offers a strong platform for clients to run their business on their electronic gadgets such as mobiles, smartphones, and tablets. It helps clients track the business anytime and wherever they are, as explained by Salesforce CEO Marc Benioff.
In addition, Salesforce has entered into a partnership with more 250 independent software vendors who are developing applications based on its Salesforce1 platform. Moreover, there are more than 30 Salesforce1 apps such as Evernote, Dropbox, LinkedIn, and HP that are available on its app exchange.
Besides this, Salesforce is also trying to leverage the ExactTarget acquisition to its advantage in a more effective manner. Having integrated the digital marketing automation and analytics software provider into its product portfolio to form the ExactTarget Marketing Cloud, the company is now trying to build the world's most powerful customer platform for one-to-one marketing.
According to Forrester, digital marketing spending is expected to double in five years, and will represent 30% of the total marketing spend by 2017. Hence, Salesforce is determined to make the most out of this expected growth through its ExactTarget acquisition by delivering a robust marketing platform. Thus, it remains confident regarding the prospects of its Sales Cloud solution, which it claims to be the No. 1 platform for sales.
Strategic moves like mentioned above have helped Salesforce compete with big giants like Oracle and SAP. However, Salesforce uses Oracle database as part of its infrastructure but it competes with Oracle in the CRM space.
Salesforce's revenue increased to $4 billion in 2013 from $3 billion in 2012, while the CRM market expanded to $20 billion during the same period. Hence, Salesforce now has approximately 20% of the market share in the CRM space. Moreover, it was the fastest-growing software company with more than 30% growth in annual revenue, while Oracle was sixth on the list with just 3.4% growth. So, Salesforce seems to be outperforming Oracle.
However, Salesforce needs to keep an eye on SAP, which is trying to disrupt the CRM market. SAP had acquired Hybris last year and it is looking to combine this acquisition with its own CRM software to tap the market. This will certainly impact Salesforce's growth in the CRM space as the Hybris acquisition has bolstered SAP's e-commerce, master data management, and application portfolio for SAP.
Salesforce is rapidly increasing its business as it is landing a number of lucrative deals. Its acquisition of ExactTarget has given it a strong foothold in the CRM industry, and the company should continue benefiting from it. Salesforce expects robust growth this year and this is why investors should consider buying more shares on the stock's weakness.