With each passing quarter, Salesforce.com Inc. is proving its once-unorthodox method of providing business software applications over the Internet is becoming a corporate craze.
The latest evidence came late Thursday with the release of Salesforce.com's fourth-quarter performance and initial forecast for this year. The numbers were highlighted by the kind of rapid revenue growth that investors love, lifting the already high-flying stock by nearly 10 percent. If that gain carries over into Friday's regular trading, Salesforce.com will boast a market value of about $20 billion - not bad for a company that was widely mocked when it started in 1999.
Back then, CEO Marc Benioff was among the few evangelists for the notion of selling software as a leasing service that collected a monthly fee from customers who could use applications on any device with an Internet connection. The idea represented a radical change from the more traditional - and expensive - approach of licensing and installing software on computers kept in the corporate customers' own offices.
Gradually, though, companies have become more comfortable with allowing their software needs to be stored on remote servers. The main reason: They have realized it saves money, is more convenient and makes it easier to upgrade to new technology. To adapt, older business software makers such as Oracle Corp. and SAP AG have recently been spending billions to acquire smaller rivals that specialize in selling software as a service.
The concept is becoming so popular that the geeky term used to describe it, "cloud computing," is moving into the mainstream.
Apple Inc., the trend-setting maker of the iPod, iPhone and iPod, jumped on the bandwagon last year with a service called "iCloud" that stores consumer files in its data centers. Internet search leader Google Inc. is widely expected to introduce a similar remote-storage service later this year.
Salesforce.com won more business converts during its fiscal fourth quarter - a span running from November through January.
The company, which is based in San Francisco, sustained a loss of $4.1 million, or 3 cents per share, in the period. That contrasted with earnings of $10.9 million, or 8 cents per share, at the same time last year. Dramatically higher expenses for employee stock compensation dragged down Salesforce in the latest quarter. The difference primarily stemmed from the hiring of nearly 2,500 workers during the past year.
If not for the employee stock compensation and several other accounting items, Salesforce said it would have earned 43 cents per share. That figure was 3 cents above the average estimate among analysts polled by FactSet.
More importantly to Wall Street, Salesforce's revenue growth accelerated during the quarter. The company's revenue totaled, $632 million, up 38 percent from the prior year. That was better than the 36 percent year-over-year revenue increase in the fiscal third quarter. The revenue for the most recent quarter also exceeded the average analyst projection of $624 million.
Salesforce's outlook for its current quarter ending in April calls for revenue of $673 million to $678 million. Analysts had been expecting $664 million. The company foresees adjusted earnings per share of 33 cent or 34 cents, below the average analyst forecast of 36 cents, according to FactSet.
Salesforce shares surged $12.88 to $144.65 in extended trading.