SumZero vs. Wall Street: Salesforce.com (NYSE: CRM)

By: SumZero Staff | Published: May 31, 2012 | Be the First to Comment

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Company: Salesforce.com (NYSE: CRM)
Segment: Application Software
Headquarters: San Francisco, CA
Comps: OCRL, SAP, MSFT, CA

Market Cap: $19.08B
Recent Price: $138.00

SumZero Community Data
Members Actively Tracking CRM: 21
Community Experts: 20
Recent Community Sentiment: 86% Short, 14% Long, 0% Hold
Recent Community Price Target: $76.00

Wall Street Data
Street Analysts Covering CRM: 36
Sell-Side Sentiment: Buy
Sell-Side Price Target: $175.00

Recent SumZero Comments:
"Salesforce.com is grossly overvalued. I believe that investors are overlooking a confluence of negative factors including: aggressive accounting assumptions, highly promotional statements by Company management, reduced transparency, poor capital allocation decisions, low quality of reported earnings, and a weak corporate governance model by overemphasizing the primacy of revenue growth. In addition, I posit that management fundamentally misunderstands basic underlying business principles, most notably the theory of shareholder capitalism as evidenced by their strategic goals, corporate compensation practices, and flippant dismissal of earnings and cash flow as useful metrics for measuring shareholder value creation."

"In Salesforce.com we see a hyped company operating in an increasingly commoditized segment that is trying to maintain high levels of top line growth at any cost. So far it has achieved that by competing aggressively on price and adding revenue through acquisitions. In the meantime it is masking the heavy cost of this strategy by paying its people in stock and generating high deferred revenue through billing gimmicks. However, eventually reality will catch up with them as the core CRM becomes penetrated to the extent that further growth becomes difficult and other segments are difficult to monetize."

"Disclosure practices continued to worsen. In its 1Q FY ’11 report, CRM omitted the total customer count in the press release header. CRM brought back the metric the following quarter. During its 2Q FY ’12 conference call, management stated they would no longer provide the number of customers on a quarterly basis. Instead, CRM plans to update investors upon milestone events going forward."

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