When Cisco (CSCO) reported earnings earlier this month, investors focused on CEO John Chambers' remarks that European business was showing early signs of slowing. Shareholders moved to the sidelines not only in Cisco itself, but across technology. Salesforce.com (CRM) was especially hard hit, falling 9% on Cisco's report.
A weak market also took its toll on Salesforce shares, sending the high flyer down to a low of $132.11 ahead of its own earnings report last week. Interestingly, the stock slide filled the gap created when Salesforce announced results in February.
Salesforce enjoyed double digit year-over-year growth in Europe.
Quarterly sales from Europe rose 25% in dollars, and 33% in constant currency, to $118 million. And when adjusted for currency changes, it was the slowest growing region, Europe, that still grew faster ex-currency than Asia, which was up 32%.
The Americas remain Salesforce's best market, with revenue growing 43% to $485 million. Asia sales came in at $92 million. And, all combined, sales rose 38% to $695 million. The growth was good enough to allow the company to boost its guidance to 32% sales growth this year.
The company also executed in driving more sales to the bottom line. Operating cash flow rose 50% year-over-year to $210 million. Operating profit rose 45% as operating margins increased by 60bps - all while expanding headcount and investing in products designed to better manage and integrate the sales and customer service cycles.
Salesforce has never been confused with a value stock.
As a growth stock, the company delivered as promised. It surpassed Oracle for second in customer relationship management ("CRM") market share as it leveraged its No. 1 share position in cloud CRM for enterprise growth. At quarter end, demand translated into deferred revenue and backlog of more than $4 billion, up $400 million from the prior quarter.
The question facing Salesforce shareholders, particularly given the stock jumped nearly 9% following earnings, is whether they can continue to post gaudy numbers. While summer has always posed problems for technology stocks, the company's strong backlog and enterprises' insatiable appetite for compiling, controlling and leveraging exponential data growth, bodes well for the company into next year.
Consider, last quarter Salesforce inked the biggest deal in its history. The unnamed insurer plans to use CRM's solutions to build out a social network connecting its employees to millions of customers. This early stage trend suggests future big enterprise deals as company's look to leverage social infrastructure put in place by firms such as Facebook (FB) and Linkedin (LNKD).
Given the strong sales growth, guidance and recent drop, investors keenly interested in exposure to big data related stocks should feel good about Salesforce's future. For those worried the summer swoon will take its toll amid ongoing EU uncertainty, writing covered calls may offer some comfort.