Wednesday, October 29, 2008

MobileMe for Business Apps is announced (Windows Azure)

As previously predicted, Microsoft have released their online platform for integrating business applications, amongst other things, Windows Azure.

The is Live Mesh on steroids and then some.

Exciting times ahead.

Saturday, October 18, 2008

Salesforce to cut prices

As the article suggests, the reason must be competition and it must be biting. My only question is how do they plan on cutting the price when their margin, on average, falls around the 5% mark? I'm thinking cutting their price by 5% won't do much for them.

The big expense for Salesforce is 'sales and marketing', so if you're an 'account manager' at salesforce its time to get that resume up to date. Cutting their sales and marketing function by 10%, while short-sighted and unimaginative, should do the trick.

Salesforce share price at time of writing? $31.59. If you bought Salesforce shares a year ago you would have done as well buying into an index fund tracking the Dow. Those that bought 3 years ago are still ahead though, for now.

Thursday, October 9, 2008 goes down like a lead zeppelin

It is quite amazing what can happen in one month. has plunged from $58.00 down to $36.50. This is a drop of 37%. In comparison, Microsoft and Sage have dropped around 15%. As the winds change, so do the financial advisors with recommendations of 'Buy' quickly switching to 'Underperform' ( )

What will happen now? My take is it has not yet reached the basement.

P/E ratio is still obscene (133 if we believe msnmoney, over 300 by my calculations).

Revenue growth is, in all likelihood, going to be hit by the fun and games that is the global slowdown therefore any expectation of future earnings is going to dry up. This leaves us with the tangible book value of $3.55. Yes, I am saying that the share price could drop to the price of a bottle of beer, although the die-hards will probably keep it above $20.

I think it would also be fair to question whether are going to make that magic $1b this year that Benioff keeps banging on about. Anything less than 30% revenue growth and it ain't going to happen. Good luck with that.

However, the bigger problem for SalesForce is their growth is funded through borrowing, or more precisely, share issues. Based on my numbers, their sustainable growth rate (measure of how much a company can grow without borrowing) is shy of 5%. To achieve the double-digit growth rate of the past, SalesForce will be either issuing more shares or borrow money. Given no-one is lending money I'm guessing more shares will hit the cautious market.