No one knows hype better than Marc Benioff, the ebullient CEO of Salesforce.com (CRM:NYSE). Benioff is so self-confident he once tried to use the Dalai Lama as part of a marketing campaign.
The idea fell through, but not before it generated more publicity than the campaign itself would have produced. Some months earlier, he enlisted Arnold Schwarzenegger, then running for governor of California, to premiere his newest Terminator film at a Salesforce product launch.
The Dalai Lama stunt offended plenty of people. But like it or not, Benioff’s expensive promotions (the company spends about 54% of revenue on sales and marketing) and growing technical expertise are paying off. His brash promise to replace traditional software with applications that businesses can rent and run over the Internet has moved the company onto a new playing field.
Simply put, says John Freeland, a managing partner of Accenture (ACN:NYSE), the giant consulting and outsourcing firm, "Salesforce is moving into the big leagues."
The most obvious sign of this new maturity was the news last week that Salesforce has inked a 5,000-seat deal with Merrill Lynch and is moving closer to Accenture, which partners with Siebel Systems (SEBL:Nasdaq) and SAP (SAP:NYSE), as well as many smaller players. Taken together, they demonstrate Salesforce credibility with large enterprises, a sector it couldn’t penetrate 18 months ago. (Earlier reports that Accenture and Salesforce had signed a formal partnership are untrue, however.)
In mid-May, Salesforce announced a stronger-than-expected first quarter, boosting revenue by 18% to $64.2 million — 9% better than the Thomson First Call consensus — while earnings, with the help of a tax break, beat expectations by a penny a share and net income rose 902% to $4.4 million.
But what really got the attention of Wall Street was the company’s ongoing growth in new subscribers. Paying subscribers rose 40,000 in the quarter to 267,000, up 82% year over year and 18% sequentially. Salesforce also added an additional 1,600 customers (companies whose employees use the product), to 15,500.