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To: Bill Harmond who wrote (32637)	5/20/2007 3:07:32 PM
From: bob zagorin	Respond to of 57684

wm, here's the range of opinion on crm right now: May 17, 2007, 12:10 pm Salesforce.com: Stock Slips After Earnings Report On Street Concerns Over Spending, Margins Posted by Eric Savitz Salesforce.com (CRM) shares are sliding today despite a solid fiscal first quarter earnings report, on a range of Street concerns which boil down to some frustration with the company’s inability to take top-line growth to the bottom line. Salesforce.com continues to report scanty profits, and the company underlines the issue by reporting only GAAP profits and refusing to report on a pro forma basis to adjust for stock options; the Street on the other hand continues to provide pro forma estimates to First Call, which leads the company to warn in its press release not to make the comparison between reported results and the First Call consensus. (You certainly don’t see that very often.) Meanwhile, in the latest quarter, Salesforce.com had higher than expected capital expenditure, a fact which some assert reflects the company’s need to bulk up its infrastructure in the face of increasing competition from the likes of Microsoft (MSFT), Oracle (ORCL) and SAP (SAP). Here’s a run down on some of this morning’s commentary on the fiscal first quarter results: * David Hilal, Friedman Billings Ramsey: Despite its robust revenue growth, the company is not able to get much operating leverage due to spending. Operating expenses grew by 53% YOY as, we believe, the company has been spending in order to fight increasing competition…we think subscriber growth was lackluster and ARPU was down on a YOY basis…Maintain our Underperform rating. * Brad Reback, CIBC: The combination of continued heavy reinvesting and lack of upside to its EPS outlook will likely keep [the company’s] shares range bound…while a premium is warranted given [the company’s] superior top-line growth and market leadership, we believe its shares are fairly valued at current levels, in light of the lack of upside to its EPS guidance and continued heavy spending. Rating: Sector Performer. * Robert Schwartz, Jefferies: Revenue guidance still looks conservative, but expected high rates of investment limits profitability and keeps us on the sidelines at the current valuation…Management raised the high end of [fiscal] ‘08 revenue guidance by $8 million, but left its EPS guidance unchanged, signaling its continued appetite for spending on growth. * Patrick Walravens, JMP Securities: The main issue for Salesforce.com is Microsoft’s pending release of Microsoft Dynamics Live CRM service, a multi-tenant, on demand CRM solution currently planned to be available in [the third quarter]…While a price of $69.99 per month would give salesforce.com plenty of room to run its business, a price of $9.99 per month could dramatically pressure Salesforce.com. Microsoft has been closed lipped about pricing so far. Rating: Market Perform. * Brendan Barnicle, Pacific Crest: Performance is strong; valuation remains challenging. Because Salesforce.com made larger-than-expected capital expenditures in the quarter, we are lowering our [free cash flow] estimates for this year and next…based on [fiscal] 2009 estimates FCF per share of $1.06, it is hard to make the case that CRM is a good value…Other on-demand names offer better value. * Jason Maynard, Credit Suisse: Q1 results beat our estimates in nearly every category…the stock continues to have great upside over the next 12 months. Rating: Outperform. * Sasa Zorovic, Goldman Sachs: Our 12-month price target of $45 remains unchanged. With the stock trading near these levels, we reiterate our Neutral rating. We, however, continue to actively look for an entry opportunity and believe Salesforce.com remains a stock in which longer-term investors could use dips as attractive entry points.