Shares in Salesforce.com had risen 45 per cent since the start of the year,but lost five per cent of their value yesterday as markets became concerned about the long-term profitability of the business following a major buying spree.
The SaaS CRM firm's Q2 results revealed a net loss of$9.8m(GBP6.2m),despite posting revenues for the period ending 31 July of USD731.6m(GBP462m),a figure that is 34 per cent up on the same quarter last year.
Further reading
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The reason for the dent in profits is straightforward:Salesforce.com has been acquiring social media firms as it seeks to extend its reach to compete with rivals such as Oracle.
Last year,Salesforce.com bought Radian6,a social network monitoring service that aggregates feeds from Facebook,Twitter,blogs,YouTube,forums and elsewhere on the social web.The cost of that acquisition was$326m(GBP205m).Prior to that it had purchased Chatter,a private social network for companies.In June this year Salesforce made its biggest social media acquisition yet,stumping up$689m(GBP435m)in a cash-and-stock deal for marketing platform Buddy Media.
While Salesforce's cloud offerings remain popular(the company recently announced a major deal with food giant Nestlé,for example),valuation has always been something of a concern,with Salesforce trading at 75 times its 2013 earnings estimates,according to Yahoo Finance.
In spite of this,and the recent slide into the red,most analysts remain bullish about the firm,in view of its strong deal pipeline and continuing high rate of top-line growth in most markets.
"We've got a killer strategy as a company offering social customer service and marketing,"said CEO Marc Benioff(pictured)on a conference call,following the announcement of the Q2 results.As well as increasing sales,Salesforce.com retained more customers and sold licences for additional services,such as HR and customer services,to existing customers,Benioff stated.
