CRM: Citi, Raymond James Swoon over ‘Cloudforce’ Implications

Citigroup’s Walter Prichard this morning reiterates a Buy rating on shares of Salesforce.com (CRM), writing that the company’s “Cloudforce” user conference yesterday in San Francisco offered an “upbeat” outlook “from a cautious man,” referring to Salesforce’s chief financial officer Graham Smith.

Smith, writes Pritchard, outlined areas that are doubling in revenue and “becoming material,” such as “Data.com, Radian6, ISV business, and Global System Integrator (GSI)-led deals.”

Pritchard observes that with the December announcement that Salesforce will buy “human capital management” (basically human resources) software developer Rypple, the company is getting more ambitious about expanding into particular types of broad application categories:

We sense less caution in how SFDC is signaling its ambitions here, as well as adjacencies such as Marketing Cloud. Management said that the better the core business, the more aggressive it will be in expanding. Platform positioning has become clearer, with Heroku being positioned for B2C, third-generation code (3GL) such as open source code, whereas Force.com is positioned for more substantive 4GL applications.

Lastly, Smith said Salesforce is “holding a stern line on invoicing mix�the source of the large billings bump last quarter�with exceptions being routed directly to Smith.”

And Raymond James’s Terry Tillman reiterates an Outperorm rating on the shares, expressing his view the company is “one of the most powerful growth stories in all of software,” and that “Numerous data points suggest to us 30%-plus top-line growth can be achieved over a sustained basis.”

Tillman focuses on the company’s discussion yesterday of its increasing intention to not just sell seat licenses but to do deals that are “transformation-oriented”:

Translation – expect to see a continuation of large deal momentum over a multi-year period, which combined with a heightened focus on annual billings, presents a powerful revenue/cash flow growth story, in our opinion. Also the company indicated that it is seeing a growing proportion of platform-led deals whereby the company is monetizing subscription software around platform-as-a- infrastructure, a market much larger than customer relationship management (CRM) and where market leadership is still up for grabs.

Salesforce shares are down $1.62, or 1%, this morning at $150.81.

Fin