Forecast of Q1 Profit of Salesforce.com Was Lower Than Expected Making Shares Fall

In Tuesday’s extended trading, shares of Salesforce.com Inc. plummeted 2 percent after they released their forecast for the full fiscal year and outlook for the next quarter. Their revenue was raised for the full year slightly above what analysts had expected, but their profit for the next quarter outlook was lower than what the analysts had expected.

The company expects their adjusted profits for the first quarter to be 25 to 26 cents per share. Analysts, on the other hand, had expectations of a profit per share of 30 cents.

Mark Hawkins, the company’s Chief Financial Officer, told the investors in a recent conference call that this mixed outlook is because of more customers who have booked large deals in the fourth quarter of the company, which has resulted in a steep drop in the first quarter outlook. Hawkins added that it was because of the holiday season.

The focus of the company has been more towards partnerships and acquisitions for bolstering their services and gaining a market share against the stiff competition by competitors like Oracle Corp. and Microsoft Corp.

Salesforce.com’s core sales software revenues increased to $3 Billion by about 13.3%. This was a faster rise in the recent years and also a surprise to the analysts who considered the core software their oldest and least likely to be a driver of revenue growth as compared to the other products by the firm.

Analysts believe this expansion was due to the new features added to the product like recommendation feature, which allows salespeople to know where to call next and overall growing market for sales software.

A Wedbush analyst, Steve Koenig believes that there is going to be a lot of opportunities of growth ahead. Salesforce.com has been working on broadening their services portfolio with hopes of keeping their existing users. The company launched an AI Einstein in the month of October as part of their efforts.

Their full year guidance for revenue slightly increased from the range of $10.1 Billion – $10.15 Billion to a range of $10.15 Billion – $10.20 Billion. Reuters’ analysts expected the revenues to be $10.16 billion.

The net loss of the company widened to 7 cents a share or $51.4 million in the last quarter from a loss of 4 cents a share or $25.5 million.

If you exclude items, the total earnings per share for the company was 28 cents. The revenue showed a rise of 26.8% to $2.29 billion. The expectations of analysts was a profit of 25 cents a share and a revenue of $2.28 billion.

Up to the close on Tuesday at $81.35, the stock of the company has risen 20% in the past 12 months.

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