Thursday, February 22, 2007

SalesForce Too Much Hype

Salesforce (NYSE:CRM) announced Q4 and year end results. The sub headlines promote extensive business successes such as large increases in net new customers and users. In the conference call (transcript available at Marc Bienoff Chairman of the Board and CEO continued to sell the sizzle. Reminding one and all that major third party forecasters are predicting that in the not too distant future significant percentages of the market place will be using software as a service. Well maybe but what about today and now.

EPS under GAAP methodology was break even. All the success of new customers and users was squandered. For some reason they started a hiring binge in Q3 and ramped up costs. There is nothing to indicate that the costs will settle down. Guidance is only in the $0.07 to $0.09 per share range. This is a shadow of previous more profitable years.

The company went so far as to promote a marketing event next week where a major customer is expanding from 6,000 to 25,000 users. This all smacks to much of hucksterism and not enough of financial fundamentals. Show me the money?

Methinks the stock is being talked up. Currently trading near its 52 week high would the stock break through into new territory? Look at the insider trading reports from Yahoo Finance. Insiders have been selling like crazy in recent weeks. The Chairman & CEO Marc Bienoff, The CFO Steve Cakebread and others have been exercising and selling on their options. If it was just once or twice we could understand a little bit. In this case the pigs were at the trough.

Salesforce wants to discontinue reporting growth of users. They state this no longer truly represents business drivers. The report will be phased out quickly. In actual fact with insider trading at this frenetic level they develop huge problems as they may be accused of trading on the basis of insider information. They would be better off just releasing monthly numbers as major retailers do and leave it at that.

So if the stock can now drop and management loads up on new options then we can drive the price up and make more money.

Its all just too pink sheet for my tastes.