Salesforce.com’s (NYSE:CRM) main business is to sell cloud-based CRM software, but it has also started to make its presence felt in other segments of the cloud computing market. Cloud computing presents a long-term opportunity for Salesforce.com as IT departments leverage cloud-based software instead of investing in additional hardware and on-premise software. According to Gartner, the cloud computing market is estimated to have increased from $59 billion in 2009 to around $68 billion in 2010, and could grow to around $149 billion by 2014.  The attractive growth prospects means that other players like Oracle (NASDAQ:ORCL), SAP (NYSE:SAP), Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN) also stand to gain from the cloud computing market.
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Other than cloud-based CRM software, Salesforce.com offers cloud-based software products like Force.com, AppExchange and Database.com. Cloud-based CRM software and other cloud-based software constitutes around 63% and 26% of our $128 price estimate for Salesforce.com stock.
Salesforce.com Increasing its Presence in the Cloud Computing Market
The cloud computing market consists of software as a service (SaaS), platform as a service (PaaS) and infrastructure as a service (IaaS). Salesforce.com offers Force.com, which is the development platform and infrastructure for corporate IT departments and independent developers to build business applications. It provides an environment to develop custom applications beyond CRM. The company also offers AppExchange, which is an online directory that provides customers a way to browse, test-drive, share and install applications developed on the Force.com platform. Salesforce.com recently announced the launch of Database.com, a web-based database service, during the Dreamforce 2010 event. 
We estimate that revenues from Salesforce.com’s other cloud computing services like its Force.com platform and AppExchange have been relatively small. We project that Salesforce.com will increase its market share in the cloud computing space over our forecast period, from a relatively low current market share base.
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To what extent Salesforce.com increases its market share will depend on how much the above mentioned products can gain traction going forward. For example, Database.com is an innovative product that opens the company to a $21 billion market currently dominated by Oracle.  The potential for the cloud computing market is so large that, should Salesforce.com accelerate its market share slightly beyond our base estimates, to 1% by the end of our forecast period vs. our base estimate of 0.8%, it would imply 10% upside to our $128 price estimate for Salesforce.com stock.
- Gartner report on cloud computing market, June 2010
- Dreamforce event held during December 6-9, 2010. Introducing Database.com
- Wall Street Journal, citing Gartner as source: The database market is worth $21.2 billion, December 2010
Disclosure: No position