What's Really Behind Salesforce.com's Campus Building Cancellation?

| About: Salesforce.com, Inc. (CRM)

Two days ago, Salesforce.com (NYSE:CRM) let it be known that it would no longer go ahead with building its massive Mission Bay campus, into which it sank $278 million to buy 14 acres of land back in November 2010.

Although various reasons could have led to this decision, including Salesforce.com not wanting to commit more of its cash pile to real estate, or it having some kind of acquisition in mind and wanting to conserve money for it, one thing we can be sure: The reason Salesforce.com gave for not going ahead is not the real reason.

The reason advanced by the company's spokesman, Bruce Francis, was along these lines:

We just took a look at our long term and really our short term needs. The reality is we are going to need the square-footage before we can build it.

Or

We are growing now faster than we were growing at the time when we originally made the decision to build the campus. We are going to need space faster than we could build it. That's why we decided to suspend development of the campus.

The problem with such an explanation: going ahead with the campus would not negate the renting of additional facilities, much like Salesforce.com is now doing via long-term leases. It would simply require shorter-term leases until the new facilities were constructed.

So basically what we know about this decision is that something else prompted it - not the "unexpected" growth, but something else altogether. Indeed, as I had written already ("Salesforce.com's Q4 Deferred Revenue Growth Not What It Seems," "Salesforce.com's Big-Figure Deals Are Misleading"), several of the most hyped aspects of CRM's latest earnings report were actually artificially goosed up and didn't really represent any acceleration in growth.

Conclusion

Either Salesforce.com is conserving cash for other purposes, like further acquisitions, or Salesforce.com is not really comfortable with its own future and profitability. Either way, the reason the company gave to justify not building its campus is not the real reason.

Disclosure: I am short CRM.