10-KPeriod: FY2007

Salesforce, Inc. Annual Report, Year Ended Jan 31, 2007

Filed March 9, 2007For Securities:CRM

Summary

Salesforce.com, Inc. (CRM) filed its 10-K for the fiscal year ended January 31, 2007, detailing a period of significant growth and strategic investment. The company reported a 60% increase in total revenues to $497.1 million, driven by a substantial rise in paying subscriptions to 646,000. This growth reflects the increasing market acceptance of its on-demand CRM services, which offer a compelling alternative to traditional enterprise software. Despite strong revenue growth, the company reported a net income of $0.48 million for the fiscal year, a significant decrease from the previous year's $28.5 million. This reduction is primarily attributable to the adoption of SFAS 123R, which requires the expensing of stock-based compensation, resulting in $39.2 million in stock-based expenses during fiscal 2007. The company continued to reinvest heavily in its business, with marketing and sales expenses representing 51% of total revenue, indicating a strong focus on customer acquisition and brand building. Salesforce.com's balance sheet shows robust liquidity with $412.5 million in cash, cash equivalents, and marketable securities, positioning it well for continued expansion.

Key Highlights

  • 1Total revenues grew by 60% year-over-year to $497.1 million.
  • 2The company saw a significant increase in paying subscriptions, reaching 646,000 as of January 31, 2007.
  • 3Net income declined significantly to $0.48 million, largely due to the adoption of SFAS 123R, which resulted in $39.2 million in stock-based compensation expenses.
  • 4Marketing and sales expenses were a substantial 51% of total revenues, reflecting continued investment in growth.
  • 5The company ended the fiscal year with strong liquidity, holding $412.5 million in cash, cash equivalents, and marketable securities.
  • 6Salesforce.com acquired Sendia Corporation for $15.5 million to enhance its mobile offerings.
  • 7International revenues grew by 74% and represented 22% of total revenues, indicating expanding global reach.

Frequently Asked Questions

Salesforce's primary strategy is to be the leading provider of on-demand application services globally. Key components include continuing to drive the industry transformation towards on-demand services, strengthening and extending its CRM service offering, aggressively pursuing new customers and territories, deepening relationships with existing customers, and encouraging third-party application development on its Apex platform.

The adoption of SFAS 123R (Share-Based Payment) significantly impacted Salesforce's financial results, requiring the expensing of stock-based compensation. In fiscal year 2007, this resulted in $39.2 million in stock-based expenses, which contributed to a substantial decrease in net income compared to the prior year. The company anticipates this will continue to materially reduce its reported operating results in the future.

The filing indicates a diversified customer base, with no single customer accounting for more than 5% of total revenues in fiscal years 2007, 2006, or 2005. This suggests a healthy distribution of revenue across its approximately 29,800 customers.

Salesforce is actively expanding its international presence, with revenues from Europe and Asia Pacific growing by 74% to $109.5 million, representing 22% of total revenues. The company plans to continue investing in international markets by recruiting local sales and support personnel and building partnerships.