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Salesforce.com raises revenue outlook

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CIOL Bureau
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BOSTON, USA: Salesforce.com Inc's quarterly earnings came slightly ahead of expectations and it raised its revenue outlook, citing strong growth in orders for its business software delivered via the Internet.

But Salesforce's full-year earnings forecast fell far short of Wall Street projections and the company blamed non-cash charges associated with a debt sale and plans to expand its sales force.

Salesforce is benefiting as businesses embrace the delivery of software via the Web, a field it pioneered a decade ago that started to take off just as the recession hit.

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"With the spending environment getting better, there has been some pent up demand. They are doing a good job of engaging with customers," said Canaccord Adams analyst Richard Baldry.

The company, whose top-selling product helps businesses manage sales, reported a profit, excluding items, of 16 cents per share in the fourth quarter ended Jan. 31, beating the average analyst estimate of 15 cents according to Thomson Reuters I/B/E/S.

The 11-year-old company raised its revenue outlook for the year ending in January 2011, saying it now expects revenue to grow between 16 percent and 17 percent. Three months ago its forecast was between 15 percent and 16 percent this year.

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Global Equities Research analyst Trip Chowdhry said companies are embracing Web-based software because businesses can start using it immediately. With traditional software, companies need to buy servers, then install the programs and tweak them before they can use the programs.

"Salesforce is not doing well because the economy is improving. They are doing well because the customers are getting smart. They are focusing on instant benefits," Chowdhry said.

To be sure, Salesforce said it expects to report a full-year profit, excluding items, of 58 cents to 60 cents per share. That is below analysts' average forecast of 82 cents.

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But investors initially seemed to overlook that forecast, and Salesforce shares rose 2 percent in extended trade.

That forecast includes a tax-related charge of 17 cents related to debt that the software maker sold in January. Analysts said they had not accounted for those charges in their estimates.

Salesforce Chief Executive Marc Benioff also said he plans to boost hiring because he does not have enough sales people to pitch products every time a business is looking to buy sales management software.

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"We need to expand our distribution rapidly," Benioff, the company's 45-year-old founder, said on a conference call. "We're just not in enough deals. We need to reach this market."

JMP Securities analyst Pat Walravens said he thought it made sense for Benioff to make that investment.

Salesforce forecast first-quarter profit of 12 to 13 cents per share, versus the average Wall Street estimate of 18 cents. It projected quarterly revenue of $365 million to $367 million, ahead of analysts' average forecast of $355 million.

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Fourth-quarter revenue at the software maker -- which competes with SAP AG, Microsoft Corp, Oracle Corp  and NetSuite Inc rose 22 percent to $354 million, compared with the average analyst estimate of $342 million.

Salesforce shares rose to $70.87 after hours from their New York Stock Exchange close of $69.44.

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