Salesforce success attributed to CEO engagement

Salesforce.com (NYSE: CRM) announced yet another marvelous financially quarterly result on Wednesday after the close of the stock market. Everything had not been so cheerful for ‘cloud’ stocks recently from a stock price perspective.  LinkedIn (NYSE: LNKD) and Tableau Software (NYSE: DATA) are too recent examples of financial investors punishing stocks for weak forward-looking guidance.

Salesforces’ outstanding Q4’16 results are evident in the numbers however, Marc Benioff, Salesforce CEO, disclosed an important reason why, in his opinion, that his Company is having success against competitive rival of Oracle (NYSE: ORCL) and SAP (NYSE: SAP).  This reason is the strategy of CEO engagement.  Below is a link to the full article:

http://www.businessinsider.com/salesforce-ceo-marc-benioff-sells-directly-to-ceos-2016-2

Also, here is a quick summary of the financial results for your convenience:

  • Revenue: $1.81 billion vs. $1.79 billion expected (25% growth year over year)
  • Revenue guidance: $1.885 billion to $1.895 billion vs. $1.86 billion expected
  • Full year guidance, Salesforce had $6.67 billion in revenue, up 24% year-over-year
  • Also raised its full year revenue guidance to $8.12 billion
  • 2 deals of nine-figures (i.e $xxx,xxx,xxx)
  • 600 deals of seven-figures (i.e $x,xxx,xxx)
  • Brought in $459 million in operating cash flow in the fourth quarter, a 38% increase from last year
  • For the full year, it generated $1.61 billion in operating cash flow, bringing its total cash reserve to $2.73 billion
  • It also reported $4.29 billion in deferred revenue and $7.1 billion in unbilled deferred revenue, meaning more than $11.3 billion worth of sales have not been recorded yet

While these numbers are all great it’s still important to know that Salesforce still produces a net loss as summarized below:

  • In fourth quarter, it saw $25.5 million in net loss, down from last year’s $65.7 million net loss
  • For the full year, it decreased its net loss to $47 million from a loss of $263 million the previous year

However, this net loss is shrinking and the reason for net loss is that Salesforce is constantly doing major financial investment in growth via acquisitions, strategic investment or other sales/marketing resources for their Company.  As Mr. Benioff was once famously quoted:

This is the heyday of the Cloud. This is the Renaissance.

We are in the Great Time. ”

…and he continues…

 “So we’re still at the very, very beginning.

We are in the first innings of Cloud Computing.

This is still the Renaissance. ”

Amazon’s Web Services success and old tech

Below is a good article on the current state-of-affairs regarding ‘The Cloud’ and how Amazon’s success with their Web Services (AWS) business is getting the ‘old school’ technology providers attention.  We have summarized some of the highlights below:

  • Since Amazon (AMZN) started disclosing the results of its cloud service business back in April, the stock is up 68%, representing a $124 billion increase in stock market value
  • …the industrial giant [GE] could slash the cost of running an important oil and gas application over 90% by shifting to the cloud
    • Application updates that once took 20 days can now be implemented in two minutes
  • [Coca-Cola’s CTO] said “Our data centers have always had lots of servers, lots of cost, using a lot of energy, and this is not going to get us to the future,”
  • Amazon’s web services unit has already reported revenue of $5.4 billion for the first three quarters of the year, an increase of 70% over the same period a year ago.
    • Sales should exceed $10 billion next year and $16 billion in 2017
  • Cloud Winners, so far as of 2015, according to this article are AMZN, GOOGL and MSFT:

aws_111115

  • And the not-so-winners, so far as of 2015, according to this article are IBM, HPQ and EMC:

aws2_111115

Of course times are rapidly changing fast in ‘The Cloud’ marketplace and today’s winners certainly might be tomorrow’s losers but one thing is for certain and that is talk is cheap and actions are more important than ever in this Fad called “The Cloud”.

http://finance.yahoo.com/news/amazon-s-cloud-success-stokes-fears-of-old-tech-failures-163810909.html

Amazon’s cloud success stokes fears of old tech failures

 

 

Cloud Cash update 10/22/15

“There is no money in The Cloud”, “The Cloud is just the Internet re-branded”, “No one will ever use The Cloud because of security”.  We’ve heard it all, and then some ad nauseum.

cloud-is-a-fad-banner-1000_288.png

Ahhh, such sweet vindication.  CloudIsAFad.com was born many years ago when the debate of ‘The Cloud’ as a viable business model was real.  There were a lot of questions at the time.  There were many doubters and naysayers.  In fact the constant bashing of ‘The Cloud’ as just ‘the internet be-branded’ was what began the IsAFad.com revolution.

IsAFad.com-Reference-Model-AIFRM-graphicToday, 10/22/15, CloudIsAFad.com would like to declare that ‘The Cloud’ has officially crossed-the-chasm.

crm_crossing_the_chasm

Would you agree or do we still need to debate whether ‘The Cloud’ is a viable business model?  Below is a story that summarizes the Cloud success, or failure, of several technology giants.  We choose two bullet points that were of interest to us for your quick reference:
cloud cash

The Cloud Is Raining Cash on Amazon, Google, and Microsoft

http://finance.yahoo.com/news/cloud-raining-cash-amazon-google-003005024.html

  • Amazon.com, Google, and Microsoft all topped profit estimates last quarter, highlighting the widening gulf between companies that deliver computing via server-laden warehouses and a generation of latecomers to the cloud boom. Together, the three companies added more than $90 billion in market cap in after-hours trading following their earnings reports on Thursday.
  • “You are seeing the cloud shift everyone was talking about, and Microsoft and Amazon are benefiting from it,” said Sid Parakh, a portfolio manager at Becker Capital Management, which has about $3 billion under management. “Oracle, IBM, even VMware are reporting very weak numbers and really no momentum in cloud.”

Salesforce Q2’14 Financial Results – No Respect

When a bold, trend-setting company such as Salesforce earns the respect of the Wall Street financial community then maybe we truly have reached the point that “The Cloud” is recognized as a legitimate business model and not just a ‘fad’.  Nowadays, Salesforce is treated just as another company when analyzing their quarterly financial results.

rodney-dangerfield-quotes2

Salesforce is still not a profitable company; yet.  However, with consistently improving business, which is more sustainable than selling traditional on-premise software by-the-way, the future is bright.  They are focused on ‘growth’ versus ‘profit’ now.  If this trend continues from $-0.16 Earnings Per Share (EPS) last quarter to $-0.10 EPS this quarter it shouldn’t be too long before they are profitable.

At that inflection point it will be absolutely interesting to see how explosive the Company might grow considering the solid foundation they would have built and the unbelievable scalability of this type of Software-as-a-Service (SaaS) business model.

Below is a link to a Forbes article the summarizes Salesforce’s Q2’14 Finanical Results:

http://www.forbes.com/sites/alexkonrad/2014/08/21/salesforce-narrowly-beats-expectations-in-q2/

By almost every metric the company improved the flow of cash coming into the company by somewhere between 30% and 40%. Cash was up 34% to $246 million; deferred revenue up 31% to $2.35 billion. Unbilled and deferred revenue that the company has under contract but won’t appear on the books yet stands at $5 billion, up 32%, while Salesforce is now projecting full-year growth of between 31% and 32%, with its guidance inched up $30 million to $5.34 billion to $5.37 billion.

#CloudIsAFad and #SaaSIsAFad.com

cropped-saasisafad_header

SYNNEX diversity paying off in 2014

Computer Products distribution dark days

Many years ago my professional career was primarily working for several computer product distribution companies.  We offered products such as hard disk drives, computer memory, video cards and computer monitors.  They were all specialty items at the time but quickly became commotized where the buyers simply needed availability of a particular part number and the current price (of a hard disk drive, for example).  Fortunately, my particular business unit at each of these companies was focused on a slower sales cycle, yet highly profitable products such as document scanners, document imaging software and optical storage solutions. Law Cypress, International Computer Graphics and Bell Micro were the companies and the business was typically low-margin, high-volume and lazy (quite frankly).  At the time, in the 90’s, there was one company that was a little bit annoying but never amounted to much because they rarely earned the business.  This company was SYNNEX who was known as the low-price, no value-add, awful product knowledge, limited line card distributor.  They were the epitome of distribution scum among many scummy contenders.  In fact the current SYNNEX corporate profile at Yahoo Finance (http://finance.yahoo.com/q/pr?s=SNX+Profile), as of 4/5/14, still reads like their traditional business:

Business Summary

 

SYNNEX Corporation provides distribution and business process outsourcing (BPO) services to resellers, retailers, and original equipment manufacturers (OEMs) primarily in North America. It operates in two segments, Distribution Services and Global Business Services (GBS). The Distribution Services segment distributes information technology (IT) products, such as IT systems, peripherals, system components, software, networking equipment, consumer electronics, and complementary products to value-added resellers, system integrators, and retailers. This segment also offers data center server and storage solutions; and contract assembly services, including systems design, build-to-order, configure-to-order, and assembly capabilities, as well as value added services comprising kitting, reconfiguration, asset tagging, and hard drive imaging. The GBS segment provides BPO services, including customer management, renewals management, back office processing, and IT outsourcing through voice, chat, Web, email, and digital print. The company also provides logistics services consisting of outsourced fulfillment, virtual distribution, and direct ship to end-users; financing services comprising net terms, third party leasing, floor plan financing, letters of credit backed financing, and arrangements; marketing services, such as direct mail, external media advertising, reseller product training, targeted telemarketing campaigns, trade shows, trade groups, database analysis, print on demand services, and Web-based marketing; and online and technical support services. It also has operations in China, India, Japan, the Philippines, Costa Rica, Hungary, Mexico, Nicaragua, and the United Kingdom. The company was formerly known as SYNNEX Information Technologies, Inc. and changed its name to SYNNEX Corporation in October 2003. SYNNEX Corporation was founded in 1980 and is headquartered in Fremont, California.

 

That was then, this is now (perception is everything)

Each company I mentioned above has since seceded to exist as a business or has been acquired for next-to-nothing of its once great market valuation.  Why and why does SYNNEX’s business continue?

Because selling a tangible hardware product such as hard disk drives, computer memory or video display components becomes such a commodity over time that the only thing that matters is ‘price’ and ‘availability’.  Hence, there is no value-add and, therefore, little profit margin.

Since those long-ago days I had not paid any attention to the Company SYNNEX because I just assumed they would eventually become irrelevant and meet the same fate of many of the other computer products distributors.  However, I watch CNBC for several hours every morning to catch up on the daily business news and recently SYNNEX (NYSE: SNX) was in the news so that immediately peeked my interest.  The stock was up something like 15% in the early morning trading and I wanted to know why so I investigated this Company that I once had little regard for.  For the record, SNX’s stock price ended up over 23% for the day of 4/4/14.  But why?

stock price

Changing the corporate DNA dynamics

First and foremost, the obvious reason is that SNX had great financial results in the previous quarter and had solid guidance for the upcoming quarter.  These are the facts, but what drove these great financial results and such optimistic forecasts?  With nothing more than browsing the SYNNEX website for the answers, it’s my personal opinion that they have gone to great lengths to change the corporate DNA from a low-margin distributor persona into a true value-added solutions provider and ‘cloud’ seems to be a key component of this strategy.  A quick look at the SYNNEX corporate website is quite telling of the transformation for the Company.  No longer is a ‘great price on this particular disk drive’ prominently featured on their website.  Rather this language is replaced with language more relevant and value to business consumers such as ‘process services company’ and ‘technology solutions’ (instead of ‘distribution products’).  While it’s clear that SYNNEX still runs their traditional distribution business these corporate DNA changes are significant and ‘cloud’ plays a big part into this.

main page

SYNNEX to the Cloud?

While this might be a bit of a stretch since I don’t know anything other than what’s available on their website about their cloud business, I bet that ‘cloud’ is a significant part of the overall SYNNEX strategy.

technology solutions

For example, only one-click deeper on their website displays a well-organized list of who’s-who in the IT space such as Microsoft, Symantec, Adobe and many others as technology partners for SYNNEX CLOUDSolv Solutions.

cloudsolv

What do you think?  In your opinion is this enough of a good strategy to help SYNNEX be successful in the long run?

Cloud Computing Forecasts Update, 2013

This is simply one of the best articles about Cloud Computing that I have ever read.

http://www.forbes.com/sites/louiscolumbus/2013/11/16/roundup-of-cloud-computing-forecasts-update-2013/#!

Let me give some historical perspective.  A few years back we started CloudIsAFad.com based on the fact that ‘cloud’ was deemed by many people as “A Fad”, or “all hype” and “no revenue”. Well to the nay-sayers of ‘cloud’, I simply would like to ask you now, ‘do you think Cloud Is A Fad?’.  I defiantly ask you “do you think that ‘the cloud’ is just the internet re-branded?

I started to summarize-the-summaries of this article below but after a few bullet-points I reconsidered and thought I just ought to redirect you to the article itself as it clearly articulates trends, forecasts with many great references and charts.

  • Public IT cloud services will grow at over 7X the rest of the comparable market
  • Gartner predicts that the bulk of new IT spending by 2016 will be for cloud computing platforms and applications
  • McKinsey & Company projects that the total economic impact of cloud technology could be $1.7 trillion to $6.2 trillion annually in 2025.
  • IDC predicts public IT cloud services will reach $47.4B in 2013 and is expected to be more than $107B in 2017. Over the 2013–2017 forecast period, public IT cloud services will have a compound annual growth rate (CAGR) of 23.5%, five times that of the IT industry as a whole. The growing focus on cloud services as a business innovation platform will help to drive spending on public IT cloud services to new levels throughout the forecast period. By 2017, IDC expects public IT cloud services will drive 17% of IT product spending and nearly half of all growth across five technology categories: applications, system infrastructure software, platform as a service (PaaS), servers, and basic storage. Software as a service (SaaS) will remain the largest public IT cloud services category throughout the forecast, capturing 59.7% of revenues in 2017. The fastest growing categories will be PaaS and Infrastructure as a service (IaaS), with CAGRs of 29.7% and 27.2%, respectively.

Enjoy!

#CloudIsAFad

Congratulating LinkedIn on fantastic quarterly financial results is like a broken record

This is becoming a rather re-occurring theme where we give a brief commentary immediately after LinkedIn reports their quarterly financial numbers (which consistently impress!).  So, in true broken-record fashion, let’s say it again:  “Congratulations to LinkedIn on another fabulous quarter.”

Before we get into some of the numbers I would just like to make one general comment about this Company and their CEO, Jeff Weiner, specifically.  While LinkedIn has been experiencing terrific growth over the past few years and the stock market ‘experts’ continue to apply pressure to Jeff to provide more aggressive guidance into future revenues, he continues to temper what are probably unrealistic expectations and keeps everything in perspective.  It’s a typical under-promise and over-deliver.  While some may feel that this is ‘sand-bagging’, I disagree.  We have seen it time-after-time before where Companies tend to let Wall Street dictate potential future revenue expectations with each of their individual opinions of “Price Targets” based on a good or bad earnings report.  Jeff is having none of it and continues to guide this Company with a solid growth strategy.

Reading this full article and the comments from the analysts shows some of the frustration among the Wall Street pundits at Jeff’s ‘low-balling’:  LinkedIn Surges: What Wall Street’s Saying (http://www.thestreet.com/story/11997644/1/linkedin-surges-what-wall-streets-saying.html?puc=yahoo&cm_ven=YAHOO)

So, let’s dig into some of the numbers:

  • $363.7 million in revenue, a 59% increase on the same period a year ago.
    • Thomson Reuters were expecting … revenue of $353.8 million.
  • LinkedIn expects revenue between $367 million and $373 million,
    • …below the $383.3 million expected by a Bloomberg survey.
  • For the full year, the professional networking site raised its revenue guidance to a range between $1.46 billion and $1.48 billion, up from a prior range of $1.43 billion to $1.46 billion.
  • CEO Jeff Weiner pointed out that LinkedIn has 238 million users worldwide

Finally, just to put some icing on this cake where Wall Street has to provide one more little digg, here you go.  A direct quote from the article:

Though the company raised full-year revenue guidance, the next quarter’s guidance, as has become customary, was lower than expected.”