Various companies of all sizes are migrating to the cloud. Salesforce.com (NYSE:CRM) has emerged as one of the leading companies providing cloud computing solutions. It offers cloud-enabled CRM (customer relationship management) solutions and has a strong product portfolio with more than 100,000 customers. The company has been recording constant revenue growth. In the recently declared second-quarter results, it recorded revenue of $957 million -- a jump of 31% from last year. Its recent acquisition of ExactTarget also contributed to revenue growth.
Salesforce.com is confident about its prospects and projects revenue in the range of $4 billion to $4.025 billion for the current fiscal year, an increase of 31%-32% year over year. The market for cloud computing software by the end of 2013 is projected to be around $35.6 billion. Salesforce.com is an established name in the cloud space and is readily accepted by its customers due to its quality, support, and features offered. Services offered by Salesforce.com are focused on reducing costs by saving manpower cost and capital cost, and reduced business complexities for cloud customers.
Reduced implementation time with an accelerated return on investment are the main reasons why various corporate organizations are embracing Salesforce.com for cloud computing. Salesforce's recent synergistic tie up with Oracle (NASDAQ:ORCL) speaks to its capabilities and market strength. The tie-up enables Salesforce to use Oracle's software and hardware, opening up a gateway for Salesforce to serve a wider customer base. Salesforce also entered into an alliance with Workday (NYSE:WDAY) recently. The new features and products that customers will receive from this alliance are still not clear. However, Workday is a well-known player in the cloud and a tie-up with Salesforce looks like good news for both companies.
Over the next five years Salesforce's earnings are expected to grow at a CAGR of almost 28%, which is significantly above the industry average of 16%. The company's alliances and huge customer base should it achieve this impressive growth rate.
Terrific Growth Expected at Workday
Workday is a subscription-based cloud-enabled software solution provider. The main software solutions provided by Workday relate to financial management and human capital management. The company's second-quarter results were quite strong. It recorded a whopping growth of 71.5% in revenue from the year-ago quarter to $107.6 million. At the end of second quarter, the company had around 500 customers. Workday generates around 75% of its total revenue from subscriptions. However, operating expense increased to $99.1 million as compared to the year-ago quarter's $60.8 million.
The company is looking to expand globally, and it plans to release Workday Payroll for France and the U.K. The release of payroll system for these regions is targeted by 2013 and 2016, respectively. Workday is expected to grow at a solid pace going forward. In fact, Yahoo Finance estimates suggest that Workday's earnings will grow at a terrific annual rate of 50% for the next five years. This is certainly an impressive growth rate and tie-ups with bigger companies such as Salesforce.com should aid Workday's growth.
Workday is not expected to be profitable anytime soon as it invests in its growth, but analysts expect solid long-term performance. The company has beaten earnings estimates comprehensively in the last four quarters, with an average positive surprise of 25%. Hence, it looks as if Workday has been making the right moves to grow its business and its better-than-expected performance could continue with the proliferation of cloud computing.
Both cloud players are expected to grow at a fast clip in the future, so investors should take a closer look at them. The more conservative investor should consider Salesforce since it is profitable on a non-GAAP basis. Investors with a higher risk appetite would probably like Workday more due to its terrific earnings growth estimates.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.