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OK confession: I have a personal hate. Well, personal in the sense of the absurdity of Salesforce.com's (NYSE:CRM) valuation. No company in this environment should trade at a trailing PE of 99, however immense the prospective market. Even after taking their deferred revenue cash, cashflow/share gives a price/cash flow north of 50 times.

Optimists will wave their romantic fingers at the potential market up there in the cloud. Well guys that cloud just got a massive shrink. Microsoft (NASDAQ:MSFT) is offering their new SaaS product at a 40% discount to Salesforce, AND the first 6 months free for an annual sub!

Don't take my word for its pricing or functionality. Read this excerpt, from SearchCRM.Com below:

"You sign up for a year and get the first six months free. It's a pretty good deal," said Bill Patterson, group product manager for Microsoft Dynamics CRM. "We've already seen over 30 folks come from Salesforce.com to CRM Online, and each one of them gave us a similar quote. It worked, but it was expensive."

The offer is good through December 31.

Microsoft has consistently sought to compete on price with its SaaS-based CRM offering. When it first rolled out CRM Online, it offered the product at a promotional price of $39 per user per month in its first year. The current list price is $44 per user per month for its Professional Edition, well below its competitors. Salesforce.com charges $65 per user per month for its Professional Edition, and Oracle CRM On Demand is listed at $70.

It’s far from the first time a CRM vendor has offered to give away its product for a limited time to lure away customers from a competitor. Last October, NetSuite (NYSE:N) made a similar offer to Salesforce.com users, promising to cut their user fees in half and offering 100 hours of professional services to help with data migration and mapping processes across applications in exchange for a one-year commitment to NetSuite.

While such programs may not significantly affect the number of companies that would not have switched otherwise, "they definitely get people to look at the offerings," said Chris Fletcher, analyst with Boston-based AMR Research, "especially with CRM online and Saleforce.com. It's apples to apples."

Microsoft has not been as aggressive with such promotions until now because it has already seen some success luring away competitors’ customers, Patterson said.

"We wouldn't do them if they didn’t work," he said. "I think they work better in the online space. Your propensity to switch is greater, and you have less of a capital investment [in servers and hardware] to make switching an easier proposition."

Authors note: Short CRM, alas in the massive recent runup. They may scrape this quarter's sales target, but no way jose for the next.

Source: Salesforce.com: Absurdly Overvalued