Stalking the Fortune 500
Prognosticators love to look at Salesforce.com and imagine an impossibly tall edifice about to fall in the next stiff breeze. Maybe it could. I am not a finance guy, so what do I know? For now, though, the party continues -- and the party within the party is the one full of the doubters. What do they know? I don't think they understand the power of subscriptions.
Last week, Salesforce announced its revenue and associated metrics for the fiscal second quarter of its 2014 year. As usual, the numbers were nicely ahead of the prior year, and it was fun to look at year-over-year comparisons. Revenue was up 31 percent year-over-year at US$957 million. Deferred revenue was $1.8 billion, up 34 percent. Unbilled deferred revenue, aka cash under contract, was approximately $3.8 billion -- up 36 percent for the same period.
Rounding out the good news, Marc Benioff, Chairman and CEO said, "I'm delighted to announce that just four years after delivering our first $1 billion revenue year, we are now poised to deliver our first $1 billion revenue quarter in the third quarter of fiscal 2014."
Blue Ocean Strategy
What Benioff didn't say was that the company continues to close in on joining the Fortune 500. It's far from a done deal, and it won't happen in this fiscal year, but it's coming. For comparison, Nash-Finch of Minneapolis is now holding down the spot. I don't know what it does, but in 2012 it lost $93.9 million on revenue of $4.8208 billion. So the gap is not that big. Benioff needs four quarters of a little north of $1.2 billion -- but remember, it's a moving target, too.
True enough, there are other companies of Salesforce's size that are gunning for the same spot, but it's quite a thrill to see a company in our market doing so well. I expect the competition to get tighter going forward, because most of Salesforce's rivals have emulated the company's competitive differentiators.
Starting with dropping the Windows bad habit in favor of browser interfaces, competitors have continued to chip away by adopting cloud computing and making attempts to do something with social media. They remain agnostic at best about multitenancy, suggesting that they can give anyone who wants one a spindle for private data storage, but it's unclear if that's a trend or just a fad to get companies to migrate to the cloud.
Regardless, there is at least one area where Salesforce remains separate, and it's the biggest and most important. If you'd asked me 10 years ago, I would never have guessed it. Everybody else is still watching Salesforce and waiting to see what it does next so that they can quickly emulate it. Salesforce is, for my money, the only vendor out there with a true Blue Ocean Strategy. You've read these words before, and it's shorthand for innovation. Salesforce is delving into many different areas -- from the man-to-machine interface to bringing social concepts the last mile into the enterprise.
I love this time of year, because people come back from the beach and everything is energized again. Coming up are some major shows like Oracle OpenWorld and Dreamforce. I like both for different reasons. I go to OpenWorld for the customer-facing software but also to get a look at what's happening on the infrastructure front. Since buying Sun Microsystems, Oracle CEO Larry Ellison has been pushing the company to innovate new compute, storage and analytics machines that power the cloud, and this year will be no different.
It will be especially interesting to see if there are further announcements from Ellison and Benioff. Earlier this year, the two made big press out of basically saying they would buy some of each other's technologies, and Ellison accepted an invitation to attend Dreamforce. Benioff has spoken many times at OpenWorld but no invitation has been extended yet, to my knowledge, for OpenWorld. It would be weird if there were no reciprocity.
I like Dreamforce too, not only because it shows me some amazing new software, but also for the breadth of imagination Salesforce brings to it. To paraphrase Bobby Kennedy, Salesforce dreams things that never were and says, why not? That's not just Blue Ocean Strategy, it's Blue Ocean Culture.
So all this brings me back to the Fortune 500, where Oracle is number 80. If innovation has anything to do with making it to the Fortune 500 list in a year that will definitely be in this decade, then Salesforce has a decent shot. Earnings calls like last week's are mandatory, and so is Dreamforce. I can't wait to be briefed.