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Technology Stocks : Salesforce.com

CRM 239.89

+0.3%

Nov 7 9:30 AM EST

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To: D. K. G. who wrote (16)	8/20/2004 12:40:29 PM
From: D. K. G.	of 258

11:31AM salesforce.com (CRM) 12.68 +0.51: salesforce.com posted Q2 EPS of $0.01 on revenue of $40.581MM (+87.7% Y/Y) vs. Reuters Research consensus at $0.01 on $39.75MM. Gross margin declined 246 bps Y/Y to 79.8% due to investment in services. Operating margin increased 225 bps Y/Y to 2.9%. Americas revenue increased 81% Y/Y to $32.5MM (80% of sales). Europe revenue increased 116% 5.8MM (14% of sales). Asia/Pacific revenue increased 120% Y/Y to $2.2MM (6% of sales). Deferred revenue increased 109% Y/Y to $61.6MM. Guided for Q3 revenue of $43-45MM; consensus EPS is at $0.01 on $44.13MM. F05 EPS is expected to be $0.02-0.04 on $165-170MM; consensus is at $0.03 on $168.14MM. Gross margin is expected to remain in the 80% range. The following table shows price multiples and Y/Y growth rates for CRM compared against peers in the software & programming group. Company P/SG Ratio P/OPG Ratio P/S Y/Y Rev Growth (%) TTM 2004E 2005E TTM 2004E 2005E Salesforce.com (CRM) 0.6 27.7 10.6 7.3 4.6 212.6 58.3 60.6 Oracle (ORCL) 2.8 9.3 5.3 4.9 4.6 7.2 7.2 8.3 PeopleSoft (PSFT) 1.1 72.6 2.4 2.3 2.1 33.9 9.7 7.4 Amdocs (00C) 1.3 9.7 2.4 2.3 2.2 21.4 19.5 7.1 Chordiant (CHRD) 2.0 (31.3) 2.7 2.4 2.1 11.3 22.8 16.2 Dendrite Int'l (DRTE) 0.6 8.3 1.4 1.3 n/a 58.5 26.7 n/a E.piphany (EPNY) 2.4 (30.4) 3.0 3.3 3.1 (28.3) (13.7) 9.5 Kana Software (KANA) 0.5 (4.1) 0.8 0.9 0.8 (21.9) (19.1) 7.4 Onyx Software (ONXS) 0.6 (22.5) 0.9 0.9 0.8 (14.4) 3.0 8.1 Siebel Systems (SEBL) 1.8 n/a 2.9 3.0 2.8 (7.0) (5.0) 6.5 Software & Programming 2.5 29.2 4.5 n/a 6.7 n/a P/SG Ratio: Normalized trailing 12 month (Price / Sales) / Growth ratio as of Aug 13, 2004. **P/OPG Ratio: Normalized trailing 12 month (Price / Operating Income) / Growth ratio as of Aug 13, 2004. Shares trade at a discount to peers on a price-to-sales-to-growth basis, and are at fair value assuming sustained 29-30% revenue growth from F07 and 20% operating margin. Management pegs the market for on-demand customer relationship management solutions at over $3.6B in 2008, representing a compound annual growth rate of over 40%. We would accumulate. CRM is rewriting the rules on how software is sold. Organizations are increasingly reluctant to pay for large, standardized software packages with an uncertain return on investment. The company's customized on-demand relationship management software solution offers organizations a cost effective alternative with a faster return on investment.--Ping Yu, Briefing.com

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