Investopedia: When Will Real Earnings Matter At Salesforce.com?

For as long as leading software-as-a-service (SaaS) provider Salesforce.com (NYSE:CRM) posts explosive revenue growth and increasing subscriber figures, investors should not expect most sell-side analysts to ask many pointed questions about the actual profitability and real earnings of this business. What experienced investors - those who have been through a bubble or three - do know is that eventually real earnings and valuation always matter. That makes Salesforce.com a tricky name to like at today's price.


Fiscal First Quarter Earnings - More of the Same
Salesforce.com's fiscal first quarter results really did not break new ground; for a company that has often reported excellent (and above-expectation) growth, this was just another quarter's work well done. Nevertheless, the company did report that revenue rose 34%, with reported subscription revenue up 35%. Moreover, there was good performance across much of the business, including SFA, Chatter and Force.com.

Margins and profitability were more problematic however. Gross profit more or less kept base (on a GAAP basis), as this line grew more than 31%. Operating profit was a different story, though, as the company reported an operating loss due to far higher sales and marketing costs. Even on a non-GAAP basis (that is, excluding the significant impact of stock compensation expense), EPS showed a significant decline. 



To read the full piece, please click below:
http://stocks.investopedia.com/stock-analysis/2011/When-Will-Real-Earnings-Matter-At-Salesforce.com-CRM-GOOG-ORCL-MSFT-SAP-INTU0525.aspx